Business & Law Information Site

A guide that I hope will help you will find informative in your business and legal dealings.

Understanding Canadian Business And Partnership Law

If you are a foreign company trying to launch a new business or bring an existing business to Canada, it is absolutely essential to have a firm grasp of the rules and regulations of Canadian business law. This includes understanding methods of organization, partnership law, tax, labor and anything else associated with running a viable business.

Despite the economic downfall that occurred in some countries, Canada has managed to weather the international uncertainty in a much better way than many other nations.

The country has even been ranked as one of the best in the world to do business in, and is one of the fastest growing G-7 nations. With its abundance of natural resources, skilled work force and strong financial sector, Canada is a wonderful place to start a business.

 

Business Laws

As with other countries, there are several different ways to operate a business in Canada. The most common type of business entities here are share capital corporations. These businesses can take advantage of statutory shareholder rights and limited liability, which make them very practical. Corporations can also be incorporated without share capital. This typically occurs in non-profit businesses.

Each individual province typically sets its own laws for governing business organizations, but corporations that wish to conduct business in multiple provinces can choose incorporation under Canada’s federal law. Incorporating under federal law allows corporations to conduct business in any province without having to be licensed in each individual province.

If a company chooses to incorporate provincially, in needs to register and, depending on the circumstances, to obtain additional licenses for the other provinces in which it conducts business.

 

Partnership Laws

Corporations and individuals are also able to close business partnerships in Canada. These partnerships are established by drawing up a contract between all the parties involved and are also subject to the applicable provincial law.

British Columbia’s Partnership Act lays out all rules and regulations for partnerships in Canada. The rules in this act automatically apply to all partnerships. If the parties involved in the partnership wish to make any changes to these rules, they must write a formal partnership agreement.

There are three types of partnerships listed in the Partnership Act:

  1. General partnership;
  2. Limited partnership;
  3. Limited liability partnership.

 

General partnership

Most small business partners operate under general partnerships where each party has equal rights and responsibilities, shares equally in all profits and losses, unless a partnership agreement is made that states differently. Since each partner is equally responsible for any financial downfalls, it is wise to start a partnership with someone you know and trust.

 

Limited partnership

Limited partnerships are used as a tool for those who would like to invest in a business but do not wish to be involved in running it. Investors that get involved with a business as a limited partner are only responsible for the debt of the business up to the amount that was invested. This holds true as long as the limited partner does not become included in the management of the business.

 

Limited liability partnership

A limited liability partnership acts as an alternative to a general partnership. In a limited liability partnership, you are not equally responsible for the obligations of your partner(s) in the same manner as a general partnership. Unless debt has happened as a result of your actions, you are only responsible for your initial investment in the partnership.