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Associations in Canada

A partnership occurs when two or more people decide that they are going to work together in business and file a form called a Partnership Registration and, in some cases, enter into a Partnership Agreement.

There are three types of companies in Canada. A general partnership, a limited partnership, and a limited liability partnership.

A general partnership occurs when all individuals have equal control over the partnership and make decisions together.

A limited partnership occurs when a partner decides to agree to be a partner and, in most cases, provides some funds to the partnership, but does not want to be part of the day-to-day operations. His contribution is considered “limited”. A limited partnership can be formed with a general partner and a limited partner.

A limited liability partnership is a partnership in which the partners are not responsible for the debts, obligations, or liabilities of the partnership resulting from the actions or negligence of another partner, employee, or agent of the partnership. Lawyers and accountants generally form limited liability companies.

There is no limit to the number of partners in any type of partnership. A limited partnership would have to have at least one limited partner and one general partner, however you could have as many of each as you like. A general partnership must have at least two general partners and can have as many general partners as it wishes, but it will not have limited partners.

Companies are governed by provincial and territorial law and a form usually called a Company Registration must be completed and filed with the appropriate provincial or territorial government office. You can register the association yourself by completing the appropriate form and going to your local provincial or territorial government, and in some cases you can register online.

In some provinces and territories, you will be required to provide a Nuans Name Search Report or similar report to register an association. In Ontario this is not required. However, you should still do a preliminary (usually free) nuans name search to determine if the name is still available. It is very important that you make sure that the name you are choosing for your partnership is not similar or the same as any other name already registered. Even if the name is exactly the same, except for the ending of the name in the case of a corporation, you still must not use the name. An example of this would be if you registered a company called “Johnson Partners” and a name called “Johnson Partners Ltd” already existed. In some jurisdictions the government would allow you to do such a registration but it would not be a good idea as it is a conflict and Johnson Partners Ltd. You may not be very happy with your choice and could take it to court in an attempt to change it if It is a company that occupies a prominent place in the market. Your proposed company name should be as distinct and different from all other trade names, partnerships, sole proprietorships, trademarks, or companies as possible.

Sometimes two or more companies decide to form a partnership.

The following information is required to register a partnership:

1) The name of the company
2) The province or territory where the company will be located
3) The business address of the company
4) The postal address of the company (which can be the same)
5) The name and address of each partner
6) The purpose or nature of the company’s business
7) If any partner is a company, the social number of the company.

Partnerships are easy to form and have low startup costs. Each partner will bring their own set of skills to the partnership. One partner will have skills in some areas and another in other areas which may result in broader management knowledge and the ability to diversify tasks and responsibilities. More than one point of view can result in more effective decision making.

When a partnership is formed, the partners pool their personal assets and therefore the business partnership may need less financing than a sole proprietorship. It is also easier to borrow from loan resources when more than one person is obligated to repay the loan.

There is little government regulation for associations. Formation is simple with a company registration and there are no annual filings, keeping the cost of forming and maintaining a company low.

In a general partnership, each partner is liable for all debts and obligations of the partnership, including those incurred by one partner without the knowledge or authorization of other partners. If one of the partners is sued, the other partners in the partnership are equally responsible for any financial judgment imposed by a court. Unlike a corporation, which is considered an entity on its own, the partners are personally liable for any debt owed to the partnership. Partners are responsible for each of the other partner’s actions. Each partner is deemed to be aware of any information that has been given to another partner. Therefore, partners must be able to trust each other to disclose all relevant information.

If there is no existing partnership agreement, a partnership is dissolved upon the death or retirement of any partner or the acceptance of a new partner. A partnership agreement may be entered into with provisions that the surviving partners may purchase the interests of the deceased or retiring partner. See below for more information on partnership agreements.

Profits must be shared by all partners equally, unless there is a partnership agreement to provide different percentages for different partners who invest more or less in the partnership.

If a partner, without the consent of the other partners, carries on a business of the same nature and he or she is in competition with that of the partnership, the partner must account for and pay to the firm all profits made by the partner. in that business

A partnership is a relationship between persons conducting business in common with a view to profit, whether or not the partners call their common business a partnership. Evidence of a partnership includes joint ownership, sharing of gross returns, and receipt of a portion of profits. Relationships that were not intended to be partnerships may later be considered partnerships, and therefore you should be careful to clearly define your business relationships.

Limited partners in a limited partnership are not liable for the acts of the company. If it can be shown that a limited partner has taken part in the management of the business, he may be considered a general partner and would lose his liability protection.

Limited partnerships must comply with the statutory requirements of the Limited Partnership Laws in the province or territory where the limited partnership is formed and, as such, must provide certain notices to the government and maintain certain records.

A limited partner has no right to participate in the management and, therefore, that person has little control over his or her investment in the limited partnership.

It is more expensive to register a limited company.

You must have a partnership agreement. When a partner decides to leave a partnership, the partnership is automatically dissolved unless a partnership agreement has been signed to the contrary. If the business is viable, the remaining partners may not wish to dissolve the business. Also, in case of disputes, it is a good idea to have some clauses in your partnership agreement to cover possible situations that may arise. If you do not have a current partnership agreement, then the Companies Act of the particular province or territory in which the partnership was formed must be followed and, in most cases, legal remedies are limited. No matter how long you’ve known the person you decide to partner with, including his or her spouse, you still need to form a partnership agreement.

Your best option would be to have a partnership agreement drawn up by an attorney and each party to the agreement must have independent counsel. This is to ensure that each party is protected from any changes that occur in society, such as a death, resignation, illness, disagreements, etc. and also determine in writing how the financial aspects of the business will be handled. Without a well-drafted partnership agreement, you could expose yourself to a problem in the future that could cost you lost income if you have not provided for a partnership agreement with the proper provisions. Independent advice is especially important as a lawyer will look at the agreement from his personal point of view and will insist on adding clauses to protect him in the future against any number of situations that occur. Law firms operate as partnerships and have a better understanding of the law behind all types of partnerships.

There is no law that says you have to have a lawyer. If you can’t afford a lawyer to draft your partnership agreement, make sure you’ve read the partnership laws in your particular province or territory and make sure you have some type of partnership agreement. Also make sure the agreement has provisions for what happens if a partner gets sick, wants to quit, or dies, as well as provides for proper distribution of profits. Not having an association agreement would be a bad choice.


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