Canada is best known for being one of the most advanced countries worldwide, its cosmopolitan society, and some of the world’s most spectacular landscapes. And, of course, its passion for hockey. This vast country has a buoyant economy, which sustains a welfare state that grants free education and healthcare to all Canadians.
Yet, for avid financial investors looking for tax optimization, Canada is not a household name. However, what if we told you that some are looking at it because of the Canada Limited Partnerships and its potential use in real estate investing and other areas? With the strength of Canada’s common law system and its economic freedom, if LP were a car, it would definitely be a Rolls Royce.
What are some of the benefits of using a Canadian LP established in Ontario?
There are no restrictions on the residence of limited or general partners. There is no minimum capital. Members of the partnership can contribute any amount of money or assets to create it. Profits received outside of Canada by the partners are not subject to taxation. Limited Partnerships are not required to hold annual meetings. This type of partnership is exempt from corporate income taxes. Therefore, there are no requirements to file annual corporate tax returns, and any profit that the LP makes will be received directly by its owners. If a partner is not a Canadian resident, he won’t have tax obligations in Canada. But if one of them is a Canadian resident, any earnings received through the LP will be subject to personal income taxes. What are Limited Partnerships? This is a type of partnership composed of two or more partners. Please, do not confuse it with the Limited Liability Partnership, which is another type of structure.
Essentially, LPs are structured with a partner that oversees and manages the business and at least one limited partner that doesn’t take part in managing the company or business. While the general partner has unlimited liability in the business, the limited partners’ liability is limited to the investment he or she made.
As corporate tax regimes’ complexity keeps growing in most of the developed countries, partnerships have arisen as commercial vehicles to do business in highly regulated jurisdictions, such as Canada, Europe, or the US.
Difference between corporations and partnerships
The main difference between a corporation and a partnership is that the corporation is viewed as a separate entity under the law. Corporations calculate tax income, corporate taxes and distribute profits between shareholders. Partnerships are business entities where two or more individuals share the risks and benefits of funding and managing a business.
Partnerships don’t calculate or pay income taxes. Incomes or losses are allocated directly to the partners, who include such earnings and losses in their personal tax filing. One key difference is that members of a partnership are not shielded from the partnership’s liabilities, unlike the corporation’s shareholders. Partnerships will treat income and debts as if they were their own
Profits in partnerships tend to be greater because there are usually fewer partners than shareholders in a corporation. But you should be careful. Partnerships enjoy fewer investment options and there are not liability shields. If anything goes wrong and the business suffers losses, responsibilities will fall directly on the partners.
The Maple Leaf country offers a unique position for global investors. Here we´ll list five reasons why Canada should be on the top of your list for a corporate structure:
High standard of living: Canada is the Norway of the Americas. A country with a welfare state that grants education and healthcare to all Canadians. Even Americans cross the border to receive medical assistance in Canada.
Easy access to global markets: Canada has signed 14 free trade agreements with 51 countries worldwide. Canadian investors enjoy preferential access to markets valued at $49.3 trillion.
Minimum risk: Canada enjoys great political stability, among the best in the G7, and is the second least corrupt country on the planet according to Transparency International. Moreover, the Cato Institute has ranked Canada in the first place of the human freedom ranking.
A leader in innovation: Thanks to an innovative environment, companies such as Netflix have established their Canada hubs. The government fosters innovation with sound incentives for companies.
Rich in natural resources: Canada has huge oil and gas reserves. These resources are an important part of Canada’s economy, generating exports and millions of jobs.
Canada is the perfect destiny for investors looking for good opportunities with low risk while enjoying a high and affordable standard of living.
Limited Partnerships: all you need to know
LPs are highly prestigious financial vehicles for non-residents in Canada. Investors that use this tool will have many tax advantages doing business in this country.
As we told you before, one general partner and at least one limited partner must compose an LP. Partners can be companies or individuals, and it is not required for them to have Canadian residency.
The main difference between a general partnership and a limited partnership is that in the GPs, liabilities and management are divided between all the partners, while in LPs, the management is under the responsibility of the general partner.
Limited Partnership agreements often cover three key subjects regarding allocations: contributions of capital, allocations of accounting profit or losses and allocations regarding tax incomes or losses.
In highly regulated jurisdictions, such as Canada or the US, Limited Partnerships have become a great option for doing business. Canada doesn’t impose corporate income taxes for partnerships, and they can be created in less than two weeks.
Step by step: how to open an LP in Canada
Opening a Limited Partnership in Canada is quite easy and can be done in five to seven business days. The only thing that partners have to provide to Privatus Maximus is a copy of their passports and proof of residence.
Select a name for the Limited Partnership. It must have a Limited Partnership or LP on it, and words like “bank,” “trust,” “academy”, or “insurance” are restricted. The name can be in English or French. Complete the declaration form 3 (about LPs) and deliver it by mail to the Minister of Finance with the required fee ($210). The declaration expires five years after being signed, and it must include the LP´s main address in Canada. Sign the Partnership Agreement between limited and general partners. This document will have all the details regarding the partnership such as the contributions and the functions the general partner will have. Limited Partnerships offer great flexibility and, if established with the proper advice, can enjoy most of the liability protections that other corporate structures offer. Furthermore, the ability to allocate profit or losses directly to the partners can be beneficial under many circumstances.
In Privatus Maximus, our core value is freedom. For this reason, we have created a vast network of experts that will help you and your family to protect your future.
Through the Ontario Limited Partnership, Canada offers a unique beachhead to do business in this country. Moreover, this structure doesn’t tax non-residents and can be created in less than two weeks.
Our experts can advise you in every step of the process and prepare all the documentation. We offer a unique package that includes:
A fully registered Ontario Limited partnership. Creation of a bank account. A crypto wallet. We will need the following documents to open an Ontario LP:
Proof of ID. Proof of residential address (not older than three months). Banking reference or statement. Professional reference. CV. KYC form. All documents must be translated into English and provided in good quality scans for our expert’s review.
After the LP is created, we’ll get in contact with several banks to get the per-approval of your business´s bank account. The choice of the bank will depend on your activities and objectives. For this, you will rely on the advice of our specialists so you select the most suitable option.
Enjoying freedom in Canada is at your fingertips. The first step for this is to have the best people helping you.