Partnerships in Ontario
By Brian Madigan LL.B.
When two or more people choose to go into business, they often consider a partnership.
Their relationship will be governed under the Partnership Act.
In law, the partnership is not a separate legal entity. It is a business arrangement between two parties. It also involves the legal obligation of “joint and several” liability.
In other words, if John and Bob set up a business as partners, and they borrow money from ABC Bank or have a debt in favour of XYZ Supplier, then they are both responsible for the full amount to these third parties. They are then left to sort it out as between themselves as to who owes whom for contribution.
Let’s assume $100,000 debt owed to XYZ Supplier. Both John and Bob owe the full $100,000. But, it ends up being paid by Bob. Then Bob can turn around and collect half of that amount (assuming we have a 50/50 partnership) from John.
There is no limitation on liability for partnerships. Similarly, while the partnership prepares books of account, profits and losses are allocated to the partners who report such matters on their individual income tax returns.
They are required to register the name of the partnership so that members of the public may conduct a search of public records to determine specifically with whom they are dealing.
Brian Madigan LL.B., Broker is an author and commentator on real estate matters, if you are interested in residential or commercial properties in Mississauga, Toronto or the GTA, you may contact him through Royal LePage Innovators Realty, Brokerage 905-796-8888
www.OntarioRealEstateSource.com
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