Setting up a Business in Canada: Limited Partnership in Canada
Contributed by TBA & Associates
29 November, 2019
Canada is a country with a comparatively strict system of taxation. Ordinary Canadian companies are liable to tax on all their worldwide income. Accordingly, they have no features attributable to tax-exempt or offshore structures.
As such, Canada has an image in the eyes of entrepreneurs and government bodies as a country with a standard system of taxation. Due to this, any structure established on Canadian territory is considered a highly prestigious vehicle.
However, Canadian legislation does offer the opportunity of registering and using Canadian enterprises with a zero rate of tax. These are known as Limited Partnerships. The LP is a limited partnership which has no less than two partners. One of the partners is a General Partner, whilst the other partners have the status of Limited Partners.
A Canadian LP with foreign members, which does not carry on a business in Canada and derives no income on Canadian territory, is not liable to tax in Canada. According to the Canadian tax laws, the LP is not considered as the separate subject of taxation. It is the founders ("Partners") who should pay taxes from the profits received by the LP company in the place of their residence, in proportions according to the shares of interests belonging to them in the LP company, if it is stipulated by the legislation of that particular country.
Ontario LP Registration for Non-Residents
TBA offers registration of Limited Partnerships in Ontario, Canada for non-Canadian residents.
Limited Partnerships is a simple form of business registration in Canada, which creates a Canadian company and does not generate filing and tax obligations in Canada for partners, who are not residents of Canada.
This form of business registration is extremely popular among software developers, web programmers, computer support specialists and IT service providers, who offer services to customers in Canada, U.S., and Europe.
Filing of Financial Statements
Every Canadian LP must keep appropriate accounting records and prepare a Financial Statement annually. Corporate Taxation Canada LP companies with non-resident partners which have no business activities in Canada; do not derive any income from Canada sources, and are managed and controlled outside of Canada, are exempt from Canada Federal and Provincial corporation taxes.
Canada LP companies are not regarded as resident for tax purposes in Canada, and therefore are not entitled to take advantage of Double Tax treaties concluded by Canada with other countries.
Name of Limited Partnership
Each Limited Partnership is required to have a legal name. The name must include a legal element, such as "Limited Partnership" or "LP".
LP Name cannot include a last name or a distinctive corporate name unless it is the last name or corporate name of one of the general partners.
The name of a Limited Partnership may be in English form, French form or both.
The name cannot include restricted words, such as "bank", "trust", "insurance", "stock exchange", "university", "academy" , etc.
A minimum of one general partner is required, who may be a resident of any country.
Corporate general partners are permitted. If a corporation is incorporated outside of Canada, it must be registered in Ontario as Extra-Provincial Corporation before it becomes a general partner.
Each limited partnership must have a minimum of one limited partner, who may be an individual or legal entity.
No Canadian residency is required.
When a non-Canadian corporation is a limited partner, extra-provincial registration of the corporation in Ontario is not required.
A person may be a general partner and a limited partner at the same time in the same limited partnership. Therefore, just one person is needed for registration of limited partnership.
Contributions into Limited Partnership
There are no minimum or maximum amount of contribution is required; however it is usual to declare Standard authorised capital - CAD 1.000.
Partners may contribute money and other property to the limited partnership, but not services.
Interest of a partner in the limited partnerships is considered as a personal property.
General partners have unlimited personal liabilities for debts and obligations of the limited partnership.
Liability of the limited partners is restricted by the size of their contributions into the limited partnerships.
Limited partnership is managed by its general partners unless the Partnership Agreement allows general partners to appoint a manager.
Address of Principal Place of Business
The form confirming registration form of a limited partnership must include its address of principal place of business in Ontario. Limited partnerships are required to keep at its Ontario address records of its partners, copies of all resolutions and Partnership Agreement.
Our company provides Ontario address to its clients and maintains all records for clients limited partnerships. The address also accepts letters from the Ontario government.
When a client would like to receive letters sent by his banks, customers and suppliers at the Ontario address, he has to order our virtual office services.
Beneficial Ownership Information
Information about ultimate beneficial ownership must be disclosed to the Registered Agent of the company and is held by the agent on a confidential basis.
Limited Partnership is not considered as a taxable entity. Therefore, LP is not required to file corporate tax returns and pay income taxes.
All profit received by Limited Partnership passes through the company to its partners. Partners, who are not Canadian residents, do not have tax liabilities in Canada. If a partner is a Canadian resident, he is required to include his part of profit received through his Limited Partnership into his personal tax return and pay personal income tax.
There is no withholding tax on the profit passed to partners, who are non-Canadian residents.
There are no audit requirements for Limited Partnerships.
Should you have any question or matter you would like to discuss or clarify with us, or should you like to receive full information Report on this jurisdiction, contact us now!
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