Partnerships

partnership agreement

Partnership Agreement (Canada) Please note that the information provided herein is not legal advice and is provided for informational and educational purposes only. If you need legal advice with respect to partnership agreements in Canada, you should seek professional assistance. Partnership Agreement Template (Canada) We are pleased to offer Partnership Agreement (Canada) Template legal forms […]

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partnership agreement template lawyer

Partnership Agreement (Canada) Please note that the information provided herein is not legal advice and is provided for informational and educational purposes only. If you need legal advice with respect to partnership agreements in Canada, you should seek professional assistance. Partnership Agreement Template (Canada) We are pleased to offer Partnership Agreement (Canada) Template legal forms […]

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partnership agreement template

Partnership Agreement (Canada) Please note that the information provided herein is not legal advice and is provided for informational and educational purposes only. If you need legal advice with respect to partnership agreements in Canada, you should seek professional assistance. Partnership Agreement Template (Canada) We are pleased to offer Partnership Agreement (Canada) Template legal forms […]

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Partnership Agreement: New DL Legal Form + Video Guide I’m pleased to announce that we have just released a Partnership Agreement for Canada. This legal form can be used by two or more persons The jurisdictions that are covered are as follows: Alberta British Columbia Manitoba Ontario New Brunswick Newfoundland Nova Scotia Prince Edward Island […]

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Post image for Partnership Agreement | Contract (Ontario, Alberta, British Columbia, Canada) – Part 1: Introduction

Partnership Agreement (Canada) Please note that the information provided herein is not legal advice and is provided for informational and educational purposes only. If you need legal advice with respect to partnership agreements in Canada, you should seek professional assistance. New Partnership Agreement Template (Canada) We are pleased to offer Partnership Agreement (Canada) Template legal […]

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Post image for Partnership vs. Co-Ownership: Think about this!

Co-Ownership vs. Partnership Please keep in mind that this is not legal advice. The information provided herein is for educational purposes only. If you would like to get in touch with a lawyer to help you draft, interpret, negotiate or resolve a dispute about an Ontario partnership agreement, then you are encouraged to seek a […]

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Toronto business lawyerTaxation of Partnerships

Please note that the information provided herein is not legal advice and is provided for informational and educational purposes only. If you need legal advice with respect to drafting, reviewing, interpreting or resolving disputes concerning partnership and limited partnership agreements, you should seek professional assistance (e.g. make a post on Dynamic Legal Forms). We have Toronto, Ottawa, Hamilton, Mississauga, Brampton, and other Ontario business lawyers registered on the website who can answer your questions or help you with your partnership and limited partnership agreements. I should know – I’m one of them and you can contact me directly.

This is the first of a series of blog posts about the taxation of partnerships and limited partnerships. Now, tax laws can be quite heavy, so you’ll have to bear with me as I take you through them. I’ll try to simplify as much as possible, but I can’t guarantee that you’ll understand it. That’s why it’s best to consult with an expert if you’re thinking about forming a partnership or limited partnership.

Now, before we start, I just want to say that I’m assuming that you already understand (1) what a partnership is, (2) what a limited partnership is, and (3) how they are different from individuals and corporations. I’ve written about these topics quite extensively on DL Blog, so you can do some keyword searches or scroll through the “business” category to understand these things in greater detail. Now onto business.

Partnerships are Flow-Through Entities
Partnerships and limited partnerships are flow through entities. They are not legal persons. They don’t pay tax. Their income or losses flow through to the partners and are attributed to them. It is the partners who pay taxes, not the partnership or limited partnership. They are disregarded business vehicles. This differs from a corporation, which is considered to be a legal person separate from its owners and managers. Corporations are required to pay income taxes at both the provincial and federal levels.

How are they Taxed?
A partnership or limited partnership is taxes in the following process. First, the parties involved have to recognize that they are operating as a partnership and not some other structure (e.g. joint venture, co-owning property, corporation, franchise, etc.). Then, the parties have to determine the income, losses, and tax credits at the PARTNERSHIP LEVEL. This requires a temporary assumption that the partnership is a separate person resident in Canada. Finally, once you figure out the income, losses, and tax credits, you ALLOCATE them to the partners. It is the individual partners who have to report (and, if applicable, pay taxes on) income, losses, and tax credits.

Annual Information Returns
As per the Canada Income Tax Act, partnerships do not file separate tax returns. They file annual “information returns” setting out their income and details of the partners who are entitled to that income.

So to recap: the net income of the partners (for income tax purposes) of a limited partnership is determined by figuring out the net income of the limited partnership. To figure out the net income of the limited partnership, the Act says that you look at it as if it were a separate legal person: s. 96(1)(a). So you include income and deduct allowable expenses and other credits. Then, the partnership’s income will be attributed to the partners (usually as per the limited partnership agreement). Each partner must report their income or losses from the partnership and pay taxes accordingly: s. 96(1)(f).

Fiscal Year End
For tax purposes (remember that partnerships must file an annual partnership information return after their fiscal period), the combined effects of ss. 96(1) and 249.1 of the Canada Income Tax Act make it clear that the fiscal period will be determined by the type of taxpayers (e.g. individuals, corporations, etc.) that make up the partnership group. If any member of the partnership is an individual, then the fiscal year end must generally be the calendar year end (with certain limited exceptions). If all of the members of the partnership are corporations, the the fiscal year end can be anywhere, so long as the fiscal period does not exceed 53 weeks: s. 249.1(1)(a).

In the next blog, I’ll continue my discussion of the taxation of partnerships…

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In this blog (and definitely the next few), I’ll be talking about how to terminate or dissolve the partnership under certain sections of the Partnerships Act. I’ve previously blogged about dissolving a partnership generally, but I wanted to get into some more detail here (specifically with respect to what the courts have said about these things).

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In this blog, I’ll be discussing partnership property – i.e. property that is created or acquired by or otherwise becomes part of the partnership. Once property is determined to be partnership property, how the partners can deal with that property is governed by the Partnerships Act, their specific partnership agreement, and any judge-made rules (i.e. common law and equity rules).

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In this blog, I’ll briefly discuss co-ownership and how this structure differs from a partnership. Parties can be co-owners of property without necessarily being partners (Section 3.1 of the Partnerships Act). Here are the key differences between partnerships and co-ownerships:

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Now a partnership can be formed on purpose or by mistake or unknowingly. It doesn’t matter. So long as the criteria for a partnership exist, the parties will be considered partners and they will be governed by the Act, their agreement, and common law and equity rules.

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