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Contact Monday to Friday: 9 am to 6 pm GMT time 
Skype: CALL | CHAT

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Since 1998

The Benefits of Limited Partnerships to Non-Residents of Canada

Provinces of British Columbia, Nova Scotia and Ontario

A Limited Partnership (LP) offers many advantages to non-residents of Canada, making LPs a popular investment vehicle for foreign investors contemplating doing business in Canada.

In Canada, a LP is created when the prescribed declaration is filed in accordance with the Limited Partnerships Act. Registering an LP is a popular option for non-residents because doing so:

  • Highly prestigious Canadian company
  • No restrictions on the residency of partners
  • Availability of one-man limited partnership, when one person is a sole general and limited partner
  • There is no minimum authorized capital. Partners can make any contribution to the limited partnership
  • No withholding tax on profit received by partners outside of Canada
  • No requirements to file corporate tax returns
  • No corporate income tax.
Limited Partnerships
General Partner and Limited Partner

An LP must be composed of one (1) general partner and at least one (1) limited partner. Canadian residency is not required for the general partner nor the limited partner. The same person can be both the general partner and a limited partner. General and limited partners may be individuals or legal entities. Corporations incorporated outside of Canada are permitted to be partners of an LP if any such corporation is registered extra-provincially in Ontario (before becoming a partner).

Typically, the general partner of an LP has liability for all debts and obligations of the LP, while the liability of a limited partners is restricted to the amount such limited partner has contributed or agreed to contribute to the LP. There is no minimum contribution a limited partner must make to an LP. A limited partner’s contribution must, however, consist of money or property.

Canada Limited Partnership Taxation

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.

Advantages to establishing an LP

There are multiple advantages to establishing an LP to conduct business:

  • LPs are viewed as highly prestigious Canadian business entities;
  • LPs have no restrictions on the residency of partners, thus allowing non-residents to contribute to the partnership;
  • An LP can be composed of a single person who is the sole general and limited partner, or can be expanded to include the contributions of multiple partners;
  • There is no minimum authorized capital to an LP. Therefore, partners can make any contribution;
  • LPs can “flow through” profits and losses to their partners; and
  • In terms of taxation, there is no corporate income tax, no requirement to file corporate tax returns, and no withholding tax on profits received by partners situated outside of Canada.

 Establishing an LP requires a thorough understanding of the numerous components briefed in this summary, as well as meticulous attention to the various considerations relevant to your specific business. To ensure a diligent and efficiently managed process, individuals and corporations seeking to create an LP are encouraged to retain the services of Blaney McMurtry LLP.

Uses of Canada Limited Partnership

LPs are regularly used as vehicles for making venture capital and private equity investments, as one benefit of LPs includes confidentiality of partner identity and the amount committed to an LP. LPs are also a suitable and a popular choice for:

  • Regular trading company for doing business in Canada, US, EU and other highly regulated jurisdictions
  • Agent working under Sales Agency Agreement. Principal may be any legal entity including companies registered in low and zero tax jurisdictions
  • Software development and IT support services, when major customers are located in Canada, US and EU
  • Online based businesses (website development, marketing services, auctions, webstores, etc.)
Wish most suitable Provinces in Canada
Where to set up Your Limited Partnership

Based on the benefits including tax advantages to overseas investors and traders wishing to use a Canada Limited Partnership to reach and carry out their international business purposes, we do suggest the following Canada Provinces:

British Columbia, Nova Scotia and Ontario

The content of this article is intended to provide a general guide to the subject matter.
Technical advice should be sought about your specific needs and requirements.

The content of this article is intended to provide a general guide to the subject matter.
Technical advice should be sought about your specific needs and requirements.

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