What is a partnership?
Generally, when we talk about partnerships, we're talking/thinking about general partnerships. A General Partnership is defined as a business arrangement between two or more individuals who share the profits and liabilities of the business.
However, General Partnerships are not the only types of partnership arrangements that can be formed. In Canada, there are two other types of partnership:
Limited Partnership - A partnership consisting of one or more general partners, who have unlimited liability, and one or more limited partners, who have limited liability depending upon their contribution to the partnership. Often the limited partner contributes financially but is not otherwise involved in the business.
Limited Liability Partnership – In Canada, a limited liability partnership is often only available to groups of professionals, such as lawyers, accountants and doctors. These partnership agreements are governed by specific provincial legislation. For instance, currently in Ontario, only lawyers, chartered accountants and certified general accountants may form a Limited Liability Partnership.
Partnerships are not incorporated; each partner reports and pays income tax on his or her personal income tax return.
No matter what kind of partnership you are thinking of entering, a written partnership agreement is a must. Here are the 10 Questions Good Partnership Agreements Need to Answer.