FORMS OF PARTNERSHIP
General Partnership | Limited Partnership | Limited Liability Partnership | Extra-Provincial Partnership
Contact Neufeld Legal PC at 403-400-4092 or Chris@NeufeldLegal.com
Partnerships are a creation of common law and contract, which have been formalized by government statute to provide for operative variants capable of providing specific benefits (primarily with respect to attaining a degree of legal liability). Each form of partnership has its own particular legal structure and business functions, which dictates the choice in partnership structute, which should than be supplemented with a well drafted and legal binding partnership agreement.
A general partnership merely requires that there be a "relationship that subsists between persons carrying on a business in common with a view to profit." [definitions, Partnership Act (Alberta) R.S.A. 2000, c. P-3, comparable to definition in the Partnerships Act (Ontario) R.S.O. 1990, c. P.5] As such, for all intensive purposes, partnerships can arise quite easily, and the law will recognize them as such, unless the participants specifically choose to formalize an alternate legal construct through which they will carry forth their business pursuits. Without structure, the default structure is that of a partnership, which invariably benefits from the formalization of the partnership structure with a well-devised legal agreement.
A limited partnership consists of both general partners and limited partners, where the general partners undertake and are responsible for the operation of the partnership, while the limited partners merely undertake the investment of a specific amount of property to the limited partnership, and as such are "not liable for the obligations of the limited partnership except in respect of the amount of property the limited partner contributes or agrees to contribute to the capital of the limited partnership." [section 57, Partnership Act (Alberta) R.S.A. 2000, c. P-3, comparable to section 9 of the Limited Partnerships Act (Ontario) R.S.O. 1990, c. L.16]
A limited liability partnership is another variant of the general partnership, which is available to certain eligible professions, that provides a degree of liability protection to the partners in that they will "not [be] individually liable, directly or indirectly by means of indemnification, contribution, assessment or otherwise, for debts, obligations or liabilities of the partnership or another partner that arise from the negligence, wrongful acts or omissions, malpractice or misconduct of (a) another partner, or (b) an employee, agent or representative of the partnership that occur in the ordinary course of of carrying on practice in an eligible profession while the partnership is an Alberta LLP." [section 12, Partnership Act (Alberta) R.S.A. 2000, c. P-3, see comparable variant in subsection 10(2) in the Partnerships Act (Ontario) R.S.O. 1990, c. P.5]
Extra-provincial partnerships arise when a partnership formed in its home jurisdiction seeks to undertake business in a province other than its home jurisdiction. Based on legal criteria and specific indices, such 'foreign' partnerships are required to be extra-provincially registered with those additional provinces for purposes of conducting business within those provinces.
Legal counsel for partnerships and joint ventures therefore must facilitate the realization of optimal profits within a legal framework that lawful protects the business participants. This is essential to maximizing your Canadian partnerships and joint ventures, for it provides important assurances that will enable the business to move forward with confidence while limiting future infighting and breakdowns of the business relationship. For legal counsel as to your business partnership or joint venture, contact our law firm at Chris@NeufeldLegal.com or 403-400-4092 / 905-616-8864.
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