Partnership Agreement - Overview

This section indicated by the Navigation Bar to the left entitled "Partnership Agreements" deals with considerations for a Partnership Agreement. A Partnership Agreement is an agreement between the partners of a Partnership. In simple terms, there are two types of partnerships - General and Limited.

A General Partnership is what comes to mind for most people when they think of a partnership - two or more persons carrying a business together. Partners in a General Partnership are jointly and severally liable (that is each is liable for all of the obligations) for all agreements, acts and omissions of their partners related to the business of the partnership, whether they knew or approved of what their partners have done. Contrast this with a corporation where, in most cases, it is the corporation that is liable and not its shareholders, directors or officers. See the section on BC Incorporations for more information on this. There are tax advantages and disadvantages to a General Partnership versus a corporation. For example, in a General Partnership, in most cases, the partners will be able to write-off their start up costs for income tax purposes whereas with a corporation, the expenses incurred by the corporation may only be written off against the corporation's income. To establish a General Partnership, no formal agreement is required, although we strongly recommend there be one. See the list of provisions for more information on the considerations and types of clauses to be included in a Partnership Agreement. The name of the Partnership whose place of business is in British Columbia should be registered with the BC Registrar of Companies in the same manner as the name for a corporation (except no "suffix" such as Ltd. or Inc. is required) - see the section on Name Choices for more information or contact us.

A Limited Partnership is similar to a General Partnership, however, usually, there are two different types of partners - General Partners and Limited Partners. The General Partners are normally responsible for the operation of the Limited Partnership and its liabilities. The Limited Partners are more like passive investors and have limited liability. They  must not be actively involved in its business or else they will be deemed General Partners and have full liability. A Limited Partnership combines some of the tax advantages of a partnership - write-offs for example -  and legal advantages of a corporation - limited liability for the Limited Partners. There must be a Partnership Agreement for a Limited Partnership established in British Columbia and it must be registered with the BC Registrar of Companies. See the list of provisions for more information on the considerations and types of clauses to be included in a Partnership Agreement. The name of the Limited Partnership must be registered with the BC Registrar of Companies in the same manner as the name for a corporation - see the section on Name Choices for more information or contact us.

You should speak to your accountant and tax advisor for more information about the tax advantages and disadvantages of partnerships, corporations and other types of business associations.