In Ontario, business owners have several options for organizing their business structure, one of which is a partnership. A partnership is a business entity that is formed by two or more individuals who carry on a business with a view to making a profit. There are different types of partnerships in Ontario, each with its own characteristics, advantages, and disadvantages. In this article, we will explore the various types of partnerships in Ontario and how a lawyer can assist you in setting up and managing your partnership.
1. General Partnership
A general partnership is the most common type of partnership in Ontario. In a general partnership, each partner contributes money, property, or services to the business and shares in the profits and losses. Each partner also has the authority to make decisions on behalf of the partnership. However, partners are also personally liable for the debts and obligations of the partnership.
2. Limited Partnership
A limited partnership consists of at least one general partner and one or more limited partners. The general partner has the authority to make decisions on behalf of the partnership and is personally liable for the debts and obligations of the partnership. The limited partner, on the other hand, has limited liability and is not involved in the day-to-day management of the business. A limited partner’s liability is limited to the amount of their investment in the partnership.
3. Limited Liability Partnership (LLP)
A limited liability partnership (LLP) is a type of partnership in which the partners have limited liability for the debts and obligations of the partnership. In an LLP, each partner is liable only for their own acts or omissions and is not personally liable for the acts or omissions of other partners.
4. Professional Corporation
A professional corporation is a type of partnership that is formed by licensed professionals, such as doctors, lawyers, and accountants. In a professional corporation, each partner is protected from personal liability for the debts and obligations of the partnership. However, each partner is liable for their own professional misconduct.
Now that we’ve discussed the different types of partnerships in Ontario, let’s take a look at some of the benefits and drawbacks of each type.
General partnerships are relatively easy to set up and operate, and partners share in the profits and losses. However, partners are also personally liable for the debts and obligations of the partnership.
Limited partnerships offer limited liability to some partners, which can be attractive to investors who want to limit their risk. However, the general partner is still personally liable for the debts and obligations of the partnership.
LLPs offer limited liability to all partners, making it a popular option for professionals who want to protect themselves from personal liability. However, an LLP can be more complicated to set up and operate.
Professional corporations offer protection from personal liability for all partners, making it a popular option for licensed professionals. However, it can be more expensive to set up and maintain than other types of partnerships.
So, which type of partnership is right for you? The answer depends on your specific needs and circumstances. It is essential to consult with a lawyer to determine which type of partnership is best for your business.
A lawyer can assist you in drafting a partnership agreement that outlines the roles and responsibilities of each partner, the distribution of profits and losses, and other important provisions. A partnership agreement can help to prevent disputes between partners and ensure that the partnership operates smoothly.