Canada is among the most attractive nations in the world to register a business due to its size, developed transportation system and favourable geographic location. Canada has a large number of free trade agreements with many nations around the world. With regard to global competitiveness, the World Economic Forum has ranked Canada as the 14th most competitive country.
It is simple for firms to export their goods and services globally due to Canada’s outstanding transportation infrastructure, including its rail infrastructure and maritime systems. All this makes Canada an attractive location for business owners. However, when business owners establish a business in Canada, they must first figure out the type of business they wish to incorporate in Canada.
A business entity that can be incorporated by foreign entrepreneurs in Canada is a limited partnership. There is no necessity for capital, so it is simple to register a limited partnership in Canada.
This article will describe how entrepreneurs can establish a limited partnership in Canada. It will describe the meaning, requirements, features, procedure, and documents required to setup a limited partnership in Canada.
Meaning of Limited Partnership (LP) in Canada
A limited partnership is a type of partnership firm in which the company has general as well as limited partners. Limited partners are those who often do not have the authority to run the firm, whereas general partners are those who are in charge of operating the company. Limited partners are those who have minimal responsibility for the firm, whereas general partners are those who have unrestricted responsibility for the obligations and debts of the firm.
A limited partnership (LP) is a commercial venture between two or more people in which the limited associates are just responsible for their contribution up to the invested value. A limited partnership often requires a documented partnership agreement defining the responsibilities of the corporate partnership.
Procedure to register a limited partnership in Canada
Entrepreneurs can register a limited partnership in Canada in accordance with the pertinent provincial law of the country.
In order to establish a limited partnership in Canada, the following procedure must be followed by the entrepreneur:
- One of the first steps to setup a limited partnership in Canada is to choose the name of the partnership firm. A limited partnership’s name must always include the formal designations ‘Limited Partnership’ or “LP”. The name of the partnership may be written in French or English.
- In order to establish a limited partnership in Canada, the following step is to have the name accepted and listed with the relevant provincial registry.
- After that, the parties would sign a limited partnership contract outlining the partnership’s characteristics and, if necessary, financing criteria.
- The members of a partnership must provide all needed details at the time of registration, such as their business addresses.
- The general partner will next submit a ‘Certificate of LP,’ which is a condensed copy of the limited partnership agreement, to the appropriate provincial registrar.
- The filing date of this Certificate of LP serves as the date on which the LP was formed.
Documents required to register a limited partnership in Canada
To register a limited partnership in Canada, here are the documents that must be provided:
- Name of the partnership firm and business activities that the partnership firm will engage in.
- Partnership Agreement
- Name and details of the general partner
- Name and details of the limited partner
- The business address where you open a limited partnership in Canada
- Details of all minutes and related documents
Requirements to register a Limited Partnership in Canada
There aren’t many conditions that need to be satisfied in order to establish a limited partnership in Canada.
Entrepreneurs who want to open a limited partnership in Canada have to meet the criteria listed below:
- In Canada, a limited partnership must have a minimum of two members, who may be either natural people or corporations.
- A general partner who will be held fully responsible for the obligations of the firm is required to register a limited partnership in Canada.
- Limited partners are required to establish a limited partnership in Canada, however, their culpability for the debts of the partnership is restricted.
- In Canada, there isn’t any limitation on the required amount of initial capital for a limited partnership. It is up to the partners to decide how much money they want to put into the partnership.
- There aren’t any residence requirements for partners to open a limited partnership in Canada.
Features of Limited Partnership in Canada
The features of a limited partnership are as follows:
- It is managed by a sole general partner who is solely responsible for all debts of the firm, and is assisted by several “limited partners.”
- Limited partners make a financial contribution but are not permitted to govern the business and participate in decision-making over how the business is run.
- The sole general partner receives a larger portion of the profits in return for greater contributions and responsibility.
- The financial contributions made by the limited partners serve as a ceiling on their liabilities.
Advantages of setting up a Limited Partnership in Canada
There are numerous benefits available to company owners that setup a limited partnership in Canada. For example, entrepreneurs who set up a limited partnership in Canada can enjoy a variety of tax benefits, reduce Canadian tax responsibilities and filing requirements, etc.
There are numerous other advantages that an entrepreneur can get if they register a limited partnership in Canada, some of which are given below:
- Limited liability: Limited partners in a limited partnership firm enjoys limited liability. As such, their obligation is capped at the amount of their financial investment in the partnership.
- Little access to the possessions of the limited partners: Since the liabilities of limited partners are restricted to the payments they contributed to the partnership, having such little access to the properties is advantageous for the limited partners. As a result, if you register a limited partnership in Canada, the general partner’s financial possessions may be taken to satisfy potential obligations.
- Exempt from filing tax returns: Since an LP is not regarded as a distinct legal organization that is subject to taxation, all earnings made by the LP are distributed to its associates via the LP, who then pay tax in accordance with their home nation’s legal requirements. As a result, LPs are exempt from filing tax returns and paying income taxes in Canada.
- Public reporting isn’t necessary: The partnership’s accounting records do not need to be fully disclosed to the public. Just primary financial data is necessary for managing the partnership and meeting the demands of the suppliers, banks, tax authorities, and limited partners.
Conclusion
There are many different sorts of enterprises available to foreign business owners who desire to start their enterprise in Canada. Among these one of the easiest is to register a limited partnership in Canada. An LP is a form of partnership firm that has two or more individuals. In order to register a limited partnership in Canada, general and limited partners are necessary. Additionally, business owners setup a Limited Partnerships in Canada to minimise taxes.
To setup a Limited Partnership in Canada, get in touch with our business professionals at OnDemand International. Our professionals will assist you with the registration process and will provide every necessary detail on how to open a Limited Partnership in Canada.