What is a general partnership | BDC.ca
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General partnership

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A general partnership is a business established by two or more owners. It is one of three ways of organizing a business in Canada. The other two are: Sole proprietorship and incorporation. Each of these has its own operational, accounting, tax and legal requirements.

General partnerships are relatively simple and inexpensive to form––there are no formal legal requirements. All the company needs is a registered trade name, a registered tax number for applicable taxes and a bank account. Usually, the owners will work out a partnership agreement that outlines their respective powers, ownership share and capital contribution as well as the profit distribution and operating procedures for the business. Entrepreneurs can find free partnership agreement templates online.

The owners or partners can individually bind the partnership with assets and obligations, so it is important to choose partners that fit with the organization, its goals and values.

More about general partnerships

General partnership is more complex than sole proprietorship, but less complex than incorporation. Its basic features are as follows:

Features Pros and cons
Operations
General partnership includes joint ownership with some formalities and moderate administration expenses. The owners pool their funds to raise capital.

Decision-making can be cumbersome, with important decisions made by voting among partners. Smaller decisions may be made individually as long as others are informed.
Accounting
Revenues, expenses and cash flow management are all tracked internally with additional outside support from other professional accountants.

Public reporting is not required, but general purpose financial information is needed to run the company and satisfy bankers, vendors, tax collectors, etc.
Taxation
Each partner is taxed personally on his or her share of partnership income, so a tax return for the general partnership itself is not required.

There are limits to what expenses can be deducted. Taxable income is subject to individual personal tax rates.
Legal
Each partner is liable for all assets and liabilities of the partnership.

If the company is sued, each partner’s personal assets can be seized to settle the claims.

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