What is a Limited Liability Partnership in Ontario?

A Limited Liability Partnership (LLP) is a business structure that limits a partner's personal liability for the negligence, errors, or malpractice of another partner or employee. In Ontario, LLPs are generally reserved for regulated professions such as lawyers, accountants, and other licensed practitioners.

How do I register a Limited Liability Partnership in Ontario?

To register an LLP in Ontario, you must: 1. Complete Form 6 from the Ministry of Government Services. 2. Submit it to obtain a Business Identification Number (BIN). 3. Register the LLP name, ensuring it ends with "LLP," "L.L.P.," or "Limited Liability Partnership." Registrations must be renewed every five years.

Do LLPs pay income tax in Canada?

No. LLPs are pass-through tax entities. The partnership does not pay income tax. Instead, profits or losses flow through to the partners, who report them on their personal tax returns.

What are the advantages of operating through an LLP?

LLPs offer: limited personal liability, flexible management and structure, pass-through taxation, excellent tax planning opportunities, and lower long-term administrative costs compared to corporations.

Are partners personally liable in an LLP?

Partners are not personally liable for the negligence or malpractice of other partners, but they remain liable for their own actions. The assets of the LLP itself can still be at risk, and the firm may still be liable for claims.

Is an LLP the best structure for my business?

It depends on your profession, tax goals, and risk exposure. LLPs are ideal for regulated professionals who want liability protection without incorporating. Business owners should consult a corporate or tax lawyer to determine whether an LLP, corporation, or other structure is best aligned with their goals.

Can an LLP lose its liability protection?

Yes. Liability protection may not apply if: a partner personally commits negligence or misconduct, registration rules are not followed, or the partnership fails to meet regulatory standards. Proper legal guidance helps ensure compliance.

Should I consult a lawyer before forming an LLP?

Yes. Business structure decisions impact tax obligations, liability exposure, and regulatory compliance. A business or corporate lawyer can help you choose the structure that best protects your interests.

Limited Liability Partnership (LLP) in Ontario: A Complete Guide

Q: How is an LLP different from a general partnership?

In a general partnership, partners share liability for the actions and debts of the business. In an LLP, each partner is only responsible for their own professional actions, not those of other partners. However, the LLP itself remains liable for claims against the firm.

Q: Who can register an LLP in Ontario?

Only regulated professionals governed by legislation—such as lawyers, doctors, midwives, and accountants—can operate as an LLP in Ontario. General business owners without a professional designation usually cannot register this structure.

Limited Liability Partnerships (LLP) in Ontario: A Complete Guide

A Limited Liability Partnership (LLP) is a business structure available to certain regulated professionals in Ontario that limits each partner’s personal liability for the negligence or misconduct of their fellow partners. It’s the structure most law firms, accounting firms, and certain other professional practices use when they want the operational flexibility of a partnership without the open-ended personal exposure that comes with a traditional general partnership.

If you’re a regulated professional weighing your structural options, this guide explains how an LLP works in Ontario, how it compares to a general partnership and a professional corporation, and what the registration process involves.

What Is a Partnership, and Why Does Liability Matter?

A partnership exists when two or more people carry on a business together for profit. In a traditional general partnership, all partners are jointly and severally liable for the obligations of the business which means that if one partner commits an act of negligence and a client sues, the claimant can pursue not just that partner but any or all partners personally, including their personal assets.

For professionals operating in fields where malpractice claims are a real risk, that exposure can be significant. A single negligence claim against one partner of a large accounting or law firm could, in theory, expose the personal assets of every other partner in the firm. That’s the problem the LLP structure was designed to solve.

How an LLP Limits Personal Liability

Ontario’s Partnerships Act was amended in 1998 to introduce the LLP structure for regulated professions. Under an LLP, a partner is not personally liable for the negligence, malpractice, or errors of another partner or of any employee of the firm, provided the innocent partner had no knowledge of or involvement in the misconduct.

The partner who actually committed the negligent act remains personally liable. The LLP itself remains fully liable firm assets are at risk. But the other partners’ personal assets are shielded. This is the core distinction from a general partnership: in an LLP, liability stays with the responsible party rather than spreading across the entire firm.

It’s worth being precise about what this protection does and doesn’t cover. An LLP does not protect a partner from liability for their own professional errors or from obligations they personally guaranteed. It protects them from the acts of their co-partners, which, in a multi-partner professional practice, is where the most meaningful exposure typically lies.

Who Can Register an LLP in Ontario?

In Ontario, the LLP structure is available only to regulated professions, specifically those whose governing legislation permits it. This includes lawyers (governed by the Law Society of Ontario), chartered professional accountants, midwives, and certain other licensed practitioners.

General business owners without a professional designation cannot register as an LLP in Ontario. For those businesses, the available structures are a general partnership, a corporation, or a limited partnership (which has a different structure from an LLP and serves different purposes). If you’re unsure which structure applies to your profession, speaking with a corporate lawyer before registering is the right first step.

LLP vs. Professional Corporation: Which Is Right for You?

For regulated professionals in Ontario, the LLP and the professional corporation (PC) are the two primary structural options. They offer different liability profiles and different tax outcomes, and the right answer depends on your practice size, income level, and long-term plans.

A professional corporation provides full limited liability; shareholders are not personally liable for the obligations of the corporation and access to the corporate tax system, including the small business deduction, income splitting through dividends, and the ability to accumulate retained earnings at the lower corporate rate. A PC is generally the better structure from a pure tax perspective, particularly for higher-earning professionals.

An LLP provides pass-through taxation; income flows directly to the partners and is taxed personally, with no corporate-level tax and significant operational flexibility. Partners can move capital freely, structure compensation without dividend or salary mechanics, and avoid the annual corporate maintenance obligations (minute book updates, annual returns, corporate filings) that come with a professional corporation. For large professional partnerships where dozens of partners need to share in firm economics and management without the overhead of corporate governance, the LLP is often the more practical choice.

For sole practitioners or small practices, a professional corporation combined with a holding company typically provides better tax efficiency. For mid-to-large professional partnerships where flexibility and simplicity of governance matter more than tax optimization at the individual level, an LLP is often the right answer. The comparison isn’t one-size-fits-all the specifics of your situation determine which structure serves you better. Our post on selecting the right business structure covers the broader framework.

Tax Treatment of an LLP

An LLP is a pass-through entity for tax purposes. The partnership itself does not pay income tax. Income and losses flow through to the individual partners in proportion to their partnership interest, and each partner reports their share on their personal tax return.

This has two practical implications. On the downside, high-earning partners pay tax at the top personal marginal rate on their share of partnership income there’s no ability to retain earnings in the entity at a lower corporate rate the way a professional corporation allows. On the upside, early-stage partnership losses (start-up costs, professional development, practice-building expenses) flow through directly to the partners and can be deducted against other personal income, including employment income from a prior position. For professionals launching a new practice, that pass-through of losses can produce meaningful personal tax savings in the first year or two.

LLPs also do not trigger GST/HST on most professional services differently than corporations would both structures require HST registration once the practice exceeds the $30,000 small supplier threshold. For detailed guidance on your specific tax position, coordinating with your accountant alongside legal counsel is advisable.

How to Register an LLP in Ontario

Registration of an LLP in Ontario is governed by Ontario’s Business Names Act and requires the following steps.

The business name must end with “Limited Liability Partnership,” “LLP,” “L.L.P.,” “Société à responsabilité limitée,” or “s.r.l.” No other suffix is permitted.

To register, you complete Form 6 from the Ministry of Public and Business Service Delivery, submit it along with the applicable filing fee to obtain a Business Identification Number (BIN), and then register the LLP name with the Ministry. The registration remains valid for five years and must be renewed before expiry.

Any change to the registration adding or removing a partner, changing the business address, or changing the name must be filed within 30 days. If all partners change or the business name changes, a new registration is required. If the LLP ceases to carry on business under the registered name, a cancellation must be filed within 30 days.

Most professional regulators also require the LLP to maintain a partnership agreement that meets their specific requirements. The Law Society of Ontario, for example, has specific rules about what must be included in the LLP agreement for law firms. Ensuring the agreement meets both the legal requirements and the practical needs of the partnership is one of the areas where legal advice at setup pays off most clearly.

The Partnership Agreement

Every LLP should have a written partnership agreement, and for professional partnerships, it is typically mandatory under their governing legislation. The agreement governs how the partnership operates: how income and losses are allocated among partners, how decisions are made, what happens when a partner wants to exit or retire, how new partners are admitted, and what restrictions apply to competition or solicitation after departure.

A well-drafted partnership agreement prevents most of the disputes that otherwise surface in professional partnerships. Without one, the default rules under Ontario’s Partnerships Act apply and those defaults rarely reflect what a group of professionals actually intended for their practice. At Kalfa Law we draft partnership agreements as part of LLP registrations and also help existing partnerships update agreements that no longer reflect their current structure or circumstances.

Ongoing Obligations

Once registered, an LLP has lighter ongoing compliance obligations than a corporation. There are no annual returns to file with Corporations Canada (since an LLP isn’t incorporated), no requirement to hold annual shareholder or director meetings, and no minute book to maintain. The primary ongoing obligations are the five-year registration renewal, timely reporting of changes to the registry, and compliance with the partnership agreement and the relevant professional regulator’s requirements.

Each partner files their own T1 personal tax return and reports their partnership income or loss on a T5013 (Partnership Information Return). The LLP itself files the T5013 annually, allocating income and losses to partners.

Speak With a Corporate Lawyer at Kalfa Law Firm

Kalfa Law Firm advises regulated professionals across Ontario on business structure, whether that’s an LLP, a professional corporation, a partnership, or a combination. We register LLPs, draft partnership agreements, and help professionals choose and implement the structure that fits their practice and their tax position.

Professional Corporations (PC) · Partnerships · Selecting the Right Business Structure · Corporate Tax Planning · Incorporating a Business

FAQs

What is a Limited Liability Partnership (LLP) in Ontario?

An LLP is a partnership structure available to regulated professionals in Ontario lawyers, accountants, midwives, and others that limits each partner's personal liability for the negligence or misconduct of their fellow partners. The partner who commits the act remains liable, and the firm itself remains liable, but innocent partners' personal assets are protected.

How is an LLP different from a general partnership?

In a general partnership, all partners are jointly and severally liable for the firm's obligations, meaning a single malpractice claim against one partner can expose the personal assets of every other partner. In an LLP, that cross-exposure is eliminated. Each partner is only liable for their own professional conduct, not that of their co-partners.

Who can register an LLP in Ontario?

Only regulated professionals whose governing legislation permits the LLP structure, primarily lawyers, chartered professional accountants, midwives, and certain other licensed practitioners. General business owners without a professional designation cannot register as an LLP in Ontario.

How is an LLP taxed in Canada?

An LLP is a pass-through entity. The partnership pays no income tax itself. Income and losses flow through to each partner in proportion to their interest, and partners report their share on their personal tax returns. This means partners are taxed at personal marginal rates — there is no ability to accumulate retained earnings at a lower corporate rate, as there would be with a professional corporation.

What is the difference between an LLP and a professional corporation?

A professional corporation offers full limited liability, access to the small business deduction, and the ability to retain earnings inside the corporation at a lower tax rate. An LLP offers pass-through taxation, more operational flexibility, and lower ongoing administrative costs. For smaller practices or sole practitioners, a professional corporation typically produces better tax outcomes. For larger professional partnerships where governance flexibility matters more, an LLP is often the better fit.

How do I register an LLP in Ontario?

You complete Form 6 from the Ministry of Public and Business Service Delivery, submit it to obtain a Business Identification Number, and register the LLP name with the Ministry. The name must end with "LLP," "L.L.P.," or "Limited Liability Partnership." Registration is valid for five years and must be renewed. Changes to partners, address, or name must be reported within 30 days.

Does an LLP need a partnership agreement?

Yes and for professional partnerships in Ontario, it is typically mandatory under the relevant regulator's rules. The partnership agreement governs income allocation, decision-making, partner exits, admissions of new partners, and post-departure restrictions. Without a well-drafted agreement, the default rules under Ontario's Partnerships Act apply, which rarely reflect the intentions of a professional partnership.

What are the ongoing compliance obligations of an LLP?

Ongoing obligations are lighter than a corporation's. The main requirements are renewing the registration every five years, reporting changes to the registry within 30 days, filing an annual T5013 Partnership Information Return, and complying with the relevant professional regulator's requirements. There are no shareholder meetings, minute books, or annual corporate returns required.

Can an LLP partner lose their liability protection?

Yes, in certain circumstances. Liability protection does not apply to a partner's own negligence or misconduct, to obligations the partner personally guaranteed, or to situations where the partner had knowledge of or involvement in another partner's wrongdoing. Proper registration and a compliant partnership agreement help ensure the protection remains intact.

Should I set up an LLP or a professional corporation for my practice?

It depends on your practice size, income level, and priorities. A professional corporation is generally better for tax efficiency and wealth accumulation, particularly for higher-earning professionals. An LLP is better for larger professional partnerships where operational flexibility and simplicity of governance matter more than individual tax optimization. A corporate lawyer can model both structures against your specific situation and advise on which produces the better outcome.

-Shira Kalfa, BA, JD, Partner and Founder

Shira Kalfa is the founding partner of Kalfa Law Firm. Shira’s practice is focused in corporate-commercial and tax law including corporate reorganizations, corporate restructuring, mergers and acquisitions, commercial financing, secured lending and transactional law. Shira graduated from York University achieving the highest academic accolade of Summa Cum Laude in 2012. She graduated from Western Law in 2015, with a specialization in business law. Shira is licensed to practice by the Law Society of Ontario. She is also a member of the Ontario Bar Association, the Canadian Tax Foundation, Women’s Law Association of Ontario, and the Toronto Jewish Law Society.

The above provides information of a general nature only. This does not constitute legal advice. All transactions or circumstances vary, and specified legal advice is required to meet your particular needs. If you have a legal question you should consult with a lawyer.

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Limited Liability Partnerships (LLP) in Ontario: A Complete Guide