GP in Ontario

Partnering for Success: Form a GP in Ontario and Prosper

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One of the factors explaining why Canada is no less popular with immigrants than the US is that the jurisdiction welcomes all foreign business founders, offering them low taxes and data protection. In 2024, you have a great opportunity to start a business in Canada as a non-resident by setting up a General Partnership in Ontario with great benefits comparable to those only an offshore zone may boast.

In Ontario, Canada, establishing a general partnership is an attractive option for individuals or entities looking to collaborate in business ventures. In this business structure, its founders share ownership and management responsibilities. While there are several obvious advantages to forming a general partnership in Ontario, prospective partners should also carefully consider its drawbacks before proceeding any further. Let’s carefully weigh them all up for you to make an informed decision about the future of your business in Canada.

Establishing a general partnership in Ontario: pros

One of the primary advantages of a general partnership is its simplicity of formation. Unlike corporations, which require formal registration and adherence to complex regulatory requirements, general partnerships can be established informally through a written or verbal agreement between the partners. In this particular case, you do not need to file any annual reports or financial statements with the government, unless you are a corporation or a non-resident partner. This makes it a convenient option for small businesses and startups looking to quickly launch operations in Canada.

In a general partnership, each partner has an equal say in its management and decision-making. This shared responsibility fosters a collaborative environment where partners leverage their diverse skills and expertise to drive the venture’s success. Hence, you can benefit from the experiences of each partner, dividing the workload and responsibilities according to your preferences. NB: The fact that partners distribute tasks according to their individual strengths results in more efficient operations.

By pooling their resources, partners in an Ontario general partnership typically access a greater amount of capital than they might be able to secure individually. This collective financial strength enables the partnership to invest in business expansion, purchase equipment, or fund marketing initiatives, thereby enhancing its growth potential. Besides, a general partnership can access more financing options from banks, lenders, or investors, as they will rely on the creditworthiness and reputation of each partner. 

You should also know that general partnerships in Ontario are not subject to corporate taxation. Instead, profits and losses are passed through to the individual partners, who report them on their personal tax returns. This pass-through taxation results in tax savings for partners, as they are able to offset business losses against other income, e.g., salary or investment gains. This feature is even more important if the partners are in a lower tax bracket or have other deductions or credits to offset their income.

Unlike corporations, which are required to adhere to a rigid management structure with designated officers and directors, general partnerships offer greater flexibility in organizing management responsibilities. Partners usually tailor the management structure to suit the needs of the business, allowing for more agile decision-making and adaptation to changing circumstances.

Establishing a general partnership in Ontario: pros

Perhaps the most significant drawback of a general partnership is the concept of unlimited liability. Each partner is personally liable for the debts, obligations, and liabilities of the business, including those incurred by other partners in the course of ordinary business activities. This means that partners’ personal assets, including their savings, homes, and vehicles, are at risk should the partnership encounter financial difficulties or legal disputes. If the business assets are not enough to cover the liabilities, the personal assets of each partner may be seized by creditors or the court. This exposes them to a high risk of financial ruin, especially if the business operates in a risky or litigious industry.

While shared decision-making is advantageous in promoting collaboration, it may also lead to conflicts among partners. Differences in vision, management style, or risk tolerance may arise, potentially hindering the partnership’s ability to make effective decisions, especially if no clear written partnership agreement defines the rights and obligations of each partner.

Although pooling resources provides partners with greater access to capital compared to individual ventures, general partnerships, including those in Ontario, may still face challenges when attempting to secure financing from external sources. Due to the lack of limited liability protection, lenders and investors may be hesitant to extend credit or invest in Ontario partnerships, preferring to work with corporations or limited liability companies instead.

General partnerships are often formed based on informal agreements, which leaves room for ambiguity and misunderstandings regarding each partner’s rights, responsibilities, and expectations. In the absence of a comprehensive partnership agreement, disputes may arise over such issues as profit sharing, decision-making authority, or the withdrawal or admission of partners. If unresolved, these can escalate and ultimately lead to the dissolution of the partnership.

While pooling resources is a benefit, it can also be a drawback. To raise significant amounts of capital, partners may have to rely solely on their own resources or seek additional partners. This happens to be challenging, especially if the partners have limited personal funds or if they struggle to find compatible individuals or entities willing to join the partnership.

Business success in Canada with expert support

So, you have firmly decided you will set up a GP in Ontario. This choice certainly has a vital significance for the future of your business. To be sure you are making a well-informed decision, we recommend you talk to a professional advisor. An experienced lawyer, accountant, or business consultant will help you with the legal, financial, and operational issues of setting up and running a general partnership in Ontario, Canada. They will reduce risks, increase your chances for success, and make sure you follow all the existing laws and rules.

If you don’t feel like contacting multiple specialists to ensure business success, simply visit International for assistance. In our team, we have all the experts you may require to seamlessly launch a general partnership or any other structure in Canada or elsewhere. From international bank accounts to residence and citizenship opportunities abroad, we turn your dreams into reality every day!