How to register a partnership in Ontario

Starting a business can be a daunting task, but one way to share the load and enhance your chances of success is by entering into a partnership. In Canada, partnerships are a popular business structure that allows two or more individuals or entities to combine their resources, skills, and expertise to achieve common business goals. Whether you are considering a general partnership or a limited partnership, understanding the fundamentals of forming and operating a partnership in Canada is essential.

In this post, we will guide you through the process of opening a partnership in Canada, covering key aspects such as the different types of partnerships, legal requirements, tax implications, and the advantages and disadvantages of choosing this business structure. By the end, you will have a comprehensive understanding of what it takes to establish and run a successful partnership in the Canadian business landscape.

Embarking on this journey with the right knowledge and preparation can set the foundation for a thriving and mutually beneficial business venture. Let's dive in and explore the essentials of opening a partnership in Canada.

1. Choose the type of Partnership

Starting a business in Ontario involves deciding on the type of business structure that best suits your needs. Two common types of partnerships are general partnerships and limited partnerships. Understanding the key differences between these two structures is crucial for making an informed decision that aligns with your business goals and risk tolerance.

Liability:

• General Partnership: In a general partnership, all partners have unlimited liability. This means that each partner is personally responsible for the debts and obligations of the business. If the business incurs debt or is sued, the personal assets of the partners can be used to satisfy the business's liabilities.
• Limited Partnership: A limited partnership consists of at least one general partner with unlimited liability and one or more limited partners whose liability is limited to their investment in the partnership. Limited partners do not participate in the day-to-day management of the business.

Management:

• General Partnership: All partners in a general partnership typically participate in the management and operation of the business. Each partner has equal rights and responsibilities unless otherwise agreed upon in a partnership agreement.
• Limited Partnership: In a limited partnership, the general partner manages the business and is responsible for its operations. Limited partners do not have a say in the management decisions and their involvement is typically limited to their financial investment.

Formation:

• General Partnership: A general partnership is relatively easy to form. It can be established through a verbal agreement or a written partnership agreement. There is no requirement to file with the government, but registering the business name with the Ontario Ministry of Government and Consumer Services is recommended.
• Limited Partnership: Forming a limited partnership requires filing a Declaration of Limited Partnership with the Ontario Ministry of Government and Consumer Services. This formal registration process makes limited partnerships more complex to establish compared to general partnerships.

Funding:

• General Partnership: Raising capital can be challenging as general partners are typically limited to their own resources or loans.
• Limited Partnership: Limited partnerships can attract investors who are willing to provide capital without participating in management, making it easier to raise funds.

2. Choose a Business Name

• Unique Name: Ensure your partnership's name is unique and not already in use. You can do a name search using the Ontario Business Registry or consult the Canadian Intellectual Property Office for trademarks.

3. Draft a Partnership Agreement

• Agreement: While not mandatory for a General Partnership, having a written partnership agreement is highly recommended. This agreement should outline the roles and responsibilities of each partner, profit-sharing arrangements, dispute-resolution procedures, and other key aspects of the partnership.

4. Register the Business Name

• Name Registration: If your partnership operates under a name other than the personal names of the partners, you must register the business name.
  • Go to the Ontario Business Registry to register your business name online.
  • Alternatively, you can complete the "Registration of a Business Name" form and submit it by mail or in person at a ServiceOntario location.

5. Obtain a Business Number (BN) from the CRA

• Business Number: You need to obtain a Business Number (BN) from the Canada Revenue Agency (CRA) for tax purposes.
  • Register online through the CRA’s Business Registration Online (BRO) service.
  • Alternatively, you can register by mail, fax, or phone.

6. Register for Applicable Taxes

• GST/HST: If your partnership’s annual revenue exceeds $30,000, you must register for Goods and Services Tax (GST) or Harmonized Sales Tax (HST).

  • This can be done online through the CRA’s My Business Account or during the BN registration process.

• Payroll Account: If you have employees, register for a Payroll Account with the CRA.

7. Obtain Necessary Permits and Licenses

• Local Permits: Depending on your business activities and location, you may need specific permits or licenses from your city or other municipal authorities.
  • Check with your city's Municipal Licensing and Standards for any required permits.

8. Open a Business Bank Account

• Bank Account: Open a separate business bank account to keep your business finances separate from personal finances.

9. Understand and Comply with Employment Laws

• Employment Regulations: If you plan to hire employees, familiarize yourself with Ontario’s employment laws, including minimum wage, workplace safety, and employee rights.

10. Set Up Accounting and Record-Keeping

• Accounting System: Implement an accounting system to track income, expenses, and other financial transactions. This will help with tax filings and financial management.

11. Consult Professionals

• Legal and Financial Advice: Consider consulting with a lawyer and an accountant to ensure all legal and financial aspects of your partnership are properly handled.

By following these steps, you’ll be able to register your partnership in Ontario and ensure that your business is set up for success. If you have any specific questions or need detailed advice, professional guidance from a business consultant or legal expert can be very valuable.

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