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1.1.1. Main Forms of Doing Business

Canadian law provides for several business forms for investors. The exact forms and requirements may vary from province to province, but the main forms include:

  • Limited Liability Company
  • Partnerships
  • Sole Proprietorship
  • Branch Operation
  • Joint Venture

Limited Liability Company

Limited liability companies are the most common business form in Canada and are considered a separate legal entity from its shareholders. They can be formed as private or public

Key aspects of a Limited Liability Company include:

  • May be formed by a single shareholder
  • Shareholders liability is limited to their contribution to the company
  • At least one director must be appointed for a private company, and typically at least three for a public company
  • Must be formed under federal law when operating across Canada or engaged in federally regulated business activities
  • When operating in a single province they may be formed under provincial law
  • When formed under federal law, a corporation may still need to be registered or licensed to conduct operations in certain provinces


Partnerships in Canada may be formed based on the partnership laws of the province in which it is located. Canada's common law provinces allow for the formation of general and limited partnerships, while the province of Québec also recognizes undeclared partnerships.

In general, partnerships are defined as when two or more individual persons or legal entities carry on business together with a view to profit. For tax purposes a partnership is not considered a separate entity, and all profits are taxed in the hands of the partners.

Key aspects of a General Partnership include:

  • May be formed by at least 2 general partners, all of which have unlimited liability
  • All partners make take part in the management of the partnership
  • Although the partnership does not file an annual tax return, if there are 6 or more partners, the partnership must file an annual partnership information return
  • In Québec, creditors must first seek reimbursement from the property of the partnership so that the personal property of the partner is not applied to the payment of creditors of the partnership until the partner’s own creditors have been paid

Key aspects of a Limited Partnership include:

  • May be formed by at least 1 general partner and at least 1 limited partner
  • General partners have unlimited liability, while the liability of limited partners is limited to their contribution to the partnership
  • Generally, partners can take part in the management of the partnership, while limited partners may not
  • If a limited partner does take part in management, they will be considered a general partner

Key aspects of an Undeclared Partnership include:

  • Is deemed to exist when the partnership does not make the required declaration of partnership
  • Each partner retains ownership of the property constituting the partner’s contribution to the undeclared partnership
  • Each partner is liable for the debts and obligations of the other partners on an unlimited basis provided the debts have been contracted for the use or operation of the partnership

Sole Proprietorship

A sole proprietorship may be formed in Canada by an individual natural person who assumes unlimited liability for the business.

Key aspects of a sole proprietorship include:

  • The establishment procedures are simple, although licensing requirements exist for certain business types
  • Unlimited liability for the proprietor
  • Profits are taxed in the hands of the proprietor

Branch Operation

Foreign companies are allowed to conduct business in Canada through a branch operation.

Key aspects of a Branch Operation include:

  • Are established by obtaining a license or otherwise registering in the province(s) where it conducts business
  • Not treated as a separate legal entity, with its full liabilities passed to its parent company
  • May be eligible for certain tax benefits depending on the province in which it is established

Joint Venture

Joint ventures can be formed in Canada by two or more parties who agree to contribute goods, services or capital to a common commercial enterprise. They are governed by the contracts arrived at between private parties, which include the terms of collaboration, the nature of co-ventures respective contributions and the arrangements regarding management and sharing of profits.