A partnership in Canada is a partnership is an association or relationship between two or more individuals, corporations, trusts, or partnerships that join together to carry on a trade or business.
There is no requirement to have a formal written agreement executed between all parties although it is recommended to do so to establish responsibilities and liabilities of the partnership, distribution of profits and decision making protocol.
General Partnership – All partners are equally responsible or the management, operations and liabilities of the business.
Limited Partnership – This is where partners have different responsibilities and liabilities for its debts. For example – One partner operates the business and assumes liability for any debts, while the other partners who contribute capital are not responsible for any debt generated from the management of the business.
Limited Liability Partnership – All partners have limited liability for the debts of the business, similar to a corporation. The limits of liability should be outlined in a memorandum of understanding or a partnership agreement.
Partnership agreements are great ways to join forces with another group to establish business lines and generate shared profits.