All You Need To Know About General Partnerships In Ontario
In 2016, the World Bank listed Canada as the 2nd best place to start a business in the world. It may also interest you to know that the World Bank based their analysis on 88 factors across 10 categories. Meaning, Canada was placed above the OECD average for the majority of the categories.
Canada is a great place to start and grow your business.
Now the question is, are you are planning on starting a general partnership business in Ontario? If you are, then you’re in the right place. Keep reading to find out all the details concerning this business structure.
What Is a General Partnership
First, it’s important that you know the definition of a general partnership.
This is a business partnership which consists of two or more owners that represent legal entities, who combine resources together in running a joint business.
The owners that make up the partnership can be represented as individuals, trusts, or corporations.
The resources contributed by each partner in the business doesn’t have to be cash alone. The contribution can sometimes be in the form of property, skills or labor.
Elements of General Partnership in Ontario
The key elements of general partnership in Ontario are:
First, all partners have legal right to make decisions that affect their business assets or business as a whole.
Then, each partner has a share of ownership of the business assets.
The structure of the partnership is also flexible. Thus, it allows the partners to have complete freedom to determine how the business is financed and managed.
Every partner shares the rewards and risks of the business. Thus, every partner has an entitlement to share the business profits.
Finally, all partners are obligated to share in the debts and liabilities of the business, which may include business losses, business debts, or other liabilities.
Steps to Setup a General Partnership Business in Ontario
To set up a general partnership business in Ontario, you’ll need to take the following steps:
Name Your Business
Creating a name for your business is important. This is because your business name is what builds your brand. It also determines how customers associate your business with the goods and services you offer.
A good business name should describe your business activities, but it shouldn’t be too specific to avoid prevention from venturing into other business opportunities in the future.
Business names for general partnerships can’t include legal endings such as Limited (Ltd.), Incorporated (Inc.), or Corporation (Corp.).
Finding the appropriate name for your business is not always easy. However, a great name allows you build a great brand for your business.
Determine If Your Business Name Is Available
Before you register your business name, you should ensure that the name is available for you to use. In fact, you can search all your name ideas for free using our Free NUANS Preliminary Search. The NUANS database provides all Trademark, Corporate, Sole Proprietorship, General Partnership, and Operating Name registrations across Canada.
When searching for a name it’s a good idea to have a few name ideas in case your first choice is already taken. Also, try searching a few variations of the names you want to use to ensure that their aren’t similar registrations already.
Register Your Business Name
After you’ve found a name that is available, and you are ready to proceed, you will need to register the business.
General Partnership registrations are generally straightforward and can be completed in under an hour. When you are ready to register your business you can do so online here.
Register for Licenses and Permits
Depending on the nature of your business, you may require additional licences and/or permits.
A great way to find out what additional licences or permits you may require is BizPal.ca. Their online service can help you find the information you need quickly and easily.
Complete a Partnership Agreement
If you’ve made up your mind to operate a general partnership business, it is best to have a lawyer draft a Partnership Agreement.
This is because events and circumstances may arise that will threaten or have an adverse effect on the partnership structure.
If there is no written partnership agreement, it may be difficult or expensive to resolve unexpected termination of the partnership.
A good partnership agreement has a description of the responsibilities and duties of each partner. Other provisions include, but are not limited to, the name and address of the partners and other parties, description of the business, and proposed length of partnership.
The date of the agreement, capital contributions needed by partners, the method for transfer of the partnership interest, dissolution of assets, admission of new partners, the death of a partner, decision-making and dispute resolution, accounting methods, partnership records, and other details may need to be included as well.
Open a Bank Account
For you to open a bank account, you will need to provide your Master Business Licence which you would have received after registering the business. Depending on your bank, they may also require additional documentation to set up the account. As a result, you may want to consult your local branch’s Small Business Advisor to ensure you have the documents you need when you make the trip to the bank.
The Possible Risks of General Partnership
It is normal for partners to invest their personal finances in the partnership business, but if a dispute occurs among partners the case of reimbursement may arise. This may be detrimental to the business and may lead to a possible end of the partnership.
In other words, it can be risky for all partners to exercise the same authority in the business. This could cause a lot of challenges unless proper guidelines have been established in the Partnership Agreement.
Every partner in a general partnership business has no formal legal protection in place. This occurs because the business is not incorporated into a separate legal entity. This exposure can make general partnership a poor vehicle for a growing business.
A general partnership business is easy to start, requires less paperwork and lower costs than starting a corporation. But if you have made up your mind to start up this type of business, then you should be ready to follow due process to avoid unintended consequences in the future.
If you want to register your general partnership business, make sure to start with our Free NUANS Preliminary Search.