Do I need a written partnership agreement in Ontario?

While not legally required, a written agreement is strongly recommended to outline obligations, decision-making processes, and dispute procedures.

Is a partnership better than a corporation?

A partnership may work for small ventures with low risk, but corporations offer limited liability, which is often preferred.

Who can form an LLP in Ontario?

Only regulated professions authorised by statute, such as accountants or lawyers.

How is a partnership taxed?

The partnership itself does not pay income tax. Income flows to partners, who report it on their individual or corporate returns.

Partnerships

A partnership is a business structure in Ontario where two or more individuals carry on business together for profit. While partnerships can be used in various business contexts, they are generally not the preferred organizational structure due to the flow-through of liability, income, and expenses directly to the partners.

For this reason, many business owners choose to operate through a corporation, which provides a separate legal entity and limits both liability and taxation within the corporation itself.

General Partnerships

A general partnership is the most common and simplest form of partnership. In this structure:

All partners share equally in profits and losses
All partners participate in management
Each partner has unlimited personal liability for the debts and obligations of the partnership

Because personal assets may be at risk, general partnerships are typically used only where liability exposure is minimal. They are straightforward to form, and generally require only a written partnership agreement between the partners.

General Partnership – Limited Partnership (GP–LP)

A GP–LP structure includes two distinct types of partners:

General Partners

Manage the business
Hold unlimited personal liability for partnership debts

Limited Partners

Contribute capital
Have liability limited to their investment
Do not participate in day-to-day operations

This model is commonly used for real estate and investment ventures, where passive investors want limited liability while general partners oversee the business.

Limited Liability Partnerships (LLPs)

A Limited Liability Partnership (LLP) is a specialized form of partnership in which partners’ liability is limited to their own negligence or wrongful acts. In other words:

Partners are not personally liable for the negligence, errors, or omissions of other partners
A claimant can recover only from the partner who acted negligently
The partnership firm’s assets remain fully at risk

LLPs were introduced in Ontario in 1998 through amendments to the Partnerships Act.

LLPs are permitted only for the purpose of carrying on a profession, and only where an enabling statute authorizes such a structure. Examples include:

While technically any business may operate as an LLP, in practice they are generally limited to regulated professions such as lawyers, accountants, and certain other professionals.

Summary

Each partnership structure offers different levels of liability protection, control, and tax treatment. Choosing the most appropriate structure depends on: