Canada
Incorporation services in Ontario
Setting up a Limited Partnership in Ontario
Full tax-exempt Canadian entity
Canada maintains a comparatively rigorous taxation system, while common Canadian companies are subject to taxation on their global income. Consequently, these companies lack features typically associated with tax-exempt or offshore structures. As a result, Canada is often perceived by entrepreneurs and government bodies as a nation with a standard taxation system. Consequently, any entity established within Canadian borders carries a highly prestigious reputation.
Nevertheless, Canadian legislation does offer an opportunity for registering and utilizing Canadian enterprises with a zero-tax rate. These entities are referred to as Limited Partnerships (LPs). An LP is a partnership with a minimum of two partners: one General Partner and others designated as Limited Partners.
A Canadian LP with foreign members, which does not engage in business activities within Canada and generates no income within Canadian territory, remains exempt from taxation in Canada. According to Canadian tax laws, the LP itself is not regarded as a separate taxable entity. Instead, it is the founders or “Partners” who are responsible for paying taxes on the profits earned by the LP in their respective countries of residence, in proportion to their ownership interests, as stipulated by the legislation of their respective countries.
Ontario LP registration for non-residents
Registering a Limited Partnership (LP) in Canada, specifically in Ontario, is a straightforward process that creates a Canadian company. Importantly, it does not result in filing and tax obligations in Canada for partners who are not residents of the country.
This form of business registration enjoys popularity among software developers, web programmers, computer support specialists, and IT service providers. It is particularly appealing to those offering services to customers in Canada, the United States, and Europe.
General features
Each Limited Partnership in Canada must have a legal name that includes a legal element such as “Limited Partnership” or “LP.”
The name of a Canada Limited Partnership (LP) must not incorporate a surname or a unique corporate name, except when it pertains to the last name or corporate name of one of the general partners.
The name may be in English, French, or both.
It should not contain restricted words like “bank,” “trust,” “insurance,” “stock exchange,” “university,” “academy,” and so on.
Time required for registration
TBA facilitates LP registration in Ontario, Canada, typically within 1 to 3 business days.
General partners
At least one general partner is required, and they may be residents of any country. Corporate entities can also serve as general partners, but if incorporated outside Canada, they must first be registered as Extra-Provincial Corporations in Ontario.
Limited partners
Each Limited Partnership must have at least one limited partner, who can be an individual or a legal entity. Canadian residency is not a requirement, and when a non-Canadian corporation acts as a limited partner, there is no need for extra-provincial registration in Ontario. Furthermore, a single individual can serve as both a general partner and a limited partner within the same LP.
Share capital – contributions
There are no specified minimum or maximum contribution amounts, though declaring a standard authorized capital of CAD 1,000 is common. Partners can contribute money and other property but not services. A partner’s interest in the LP is considered personal property.
Personal Liability
General partners bear unlimited personal liability for the LP’s debts and obligations, while limited partners are liable only up to the extent of their contributions to the LP.
Management
An Ontario LP is typically managed by its general partners, unless the Partnership Agreement permits general partners to appoint a manager.
Annual general meeting
A Limited Partnership in Ontario is not required to hold annual general meetings.
Address of principal place of business
The registration form for an Ontario Limited Partnership must include its address of principal business in Ontario. Additionally, Limited Partnerships are required to maintain records of partners, resolutions, and the Partnership Agreement at their Ontario address.
TBA & Associates offers address in Ontario to clients and retains records for their Limited Partnerships. This address can also accept correspondence from the Ontario government.
Beneficial ownership information
Information concerning ultimate beneficial ownership must be disclosed to the Registered Agent of the company, with confidentiality strictly maintained.
Advantages of Ontario Limited Partnership
- Highly prestigious Canadian entity.
- No restrictions on partner residency.
- Possibility of a one-person Limited Partnership, where an individual serves as the sole general and limited partner.
- No minimum authorized capital requirement; partners can make any contribution.
- No withholding tax on profits received by partners outside Canada.
- No obligation to file corporate tax returns.
- No corporate income tax.
Common Uses of Ontario Limited Partnerships
Regular trading companies conducting business in Canada, the US, the EU, and other regulated jurisdictions.
Agents operating under Sales Agency Agreements, with principals potentially being any legal entity, including those registered in low or zero-tax jurisdictions.
Software development and IT support services providers, especially when major customers are located in Canada, the US, and the EU.
Online-based businesses encompassing website development, marketing services, auctions, web stores, and more.
Corporate taxation
Limited Partnerships IN Canada, Ontario (LPs) are not considered taxable entities. Consequently, LPs are not obliged to file corporate tax returns or pay income taxes.
All profits earned by an LP flow through the company to its partners. Partners who are not Canadian residents are not subject to tax liabilities in Canada. In cases where a partner is a Canadian resident, they are required to include their share of profits received through the LP in their personal tax return and pay personal income tax.
Importantly, there is no withholding tax on profits distributed to partners who are not Canadian residents.
Limited Partnerships are not subject to audit requirements.
Filing of Financial Statements for Canada LP
Each Canadian LP must maintain proper accounting records and annually prepare a Financial Statement. Canadian LP companies with non-resident partners that have no business activities in Canada, generate no income from Canadian sources, and are managed and controlled outside Canada are exempt from federal and provincial corporation taxes in Canada.
Canada tax treaties
Canada LP companies are not categorized as tax-resident entities in Canada. Consequently, they do not have the privilege of utilizing Double Tax treaties established by Canada with other countries.
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Disclaimer: While TBA & Associates strives to make the information on this website as timely and accurate as possible, the information itself is for reference purposes only. You should not substitute the information provided in this article for competent legal advice. Feel free to contact TBA Customer Services for advice on your specific cases.