How to Change From a General Partnership to an Incorporated Company

incorporating a company from a general partnership

Originally Published: Oct 29, 2015

If you currently own a general partnership where 2 or more individuals own the business and you would like or have been advised to incorporate your business, the changeover to an incorporated business is a very simple process. If you’re wondering whether a partnership can be incorporated, the answer is yes.

Incorporating the business takes you to a new level of business ownership where the business will have name protection for the business name, personal liability protection, and potential tax advantages.

What to Consider When Starting a New Incorporated Company

Incorporating your business gives you the opportunity to think about how you want your business to operate moving forward.

  1. Do you want to continue on with the same business name?
  2. Will the partners remain the same?
  3. Do you wish to operate a secondary business name under the incorporated company?

When switching to an incorporated business, if anything with the business needs to change, now is the time to do it. We often speak to clients who are taking the opportunity to make changes to their business details when moving to a newly incorporated company. If the business information will remain the same as the current general partnership, a legal ending is required for the business name, along with a few additional details.

Difference Between General Partnership & Incorporation

A general partnership and incorporation differ significantly in structure, liability, and benefits. When considering partnership vs corporation in Canada, it’s important to understand these distinctions. In a general partnership, two or more individuals share ownership, management responsibilities, and profits. However, partners also share unlimited personal liability for business debts and obligations, meaning personal assets are at risk.

Converting a partnership to a corporation creates a separate legal entity from its owners. This structure provides limited liability protection, ensuring that personal assets are generally protected from business liabilities. Additionally, incorporation offers potential tax advantages, such as income splitting and deferral opportunities, which can benefit long-term financial planning.

While general partnerships are simpler and less costly to establish, incorporation provides greater flexibility for growth, enhanced credibility, and easier access to capital. Issuing shares, including nonvoting shares, is a significant advantage of a corporation, allowing for easier fund raising. The decision to transition from a partnership to a corporation should consider these factors to align with the business’s long-term goals and strategy.

Incorporating under the Corporations Act provides additional benefits like name approval and maintaining a minute book, which enhances the business’s credibility. Each province or territory may have specific regulations, so it is crucial to be aware of local requirements. The advantages of incorporating often outweigh the simplicity of a partnership, making it a strategic choice for many businesses.

Advantages of Incorporating

Changing from a partnership to a corporation offers several significant advantages. These advantages include:

  • Limited Liability: Incorporation generally shields personal assets from business debts and obligations, providing crucial protection.
  • Tax Benefits: Lower corporate tax rates and tax deferral opportunities can lead to substantial savings over time.
  • Greater Credibility: An incorporated business often enjoys enhanced credibility, which can attract customers, partners, and investors.
  • Ease of Raising Capital: Corporations can raise capital more easily through the sale of shares, facilitating growth and expansion.
  • Name Protection: Incorporation prevents other businesses from using the same name within the jurisdiction, protecting your brand identity.
  • Management and Ownership Flexibility: The corporate structure facilitates the transfer of ownership and the inclusion of new partners.

When you have incorporated your business, it operates under the Corporations Act, which provides a clear framework of legal elements and requirements for maintaining the corporation. The article of incorporation outlines the essential aspects of the business corporation, ensuring that all legal elements are in place for a structured and compliant operation.

How to Incorporate a Partnership?

Incorporating a partnership in Ontario is as easy as registering a new incorporation. Your existing General Partnership registration documents are not converted, you would simply register a new incorporation and then cancel your existing General Partnership registration. Here’s a simple guide to get you started: 

  1. Choose Incorporation Type: Decide between a numbered corporation, suitable if the business name is not crucial for advertising, or a named corporation, ideal for businesses needing a distinctive name for branding.
  2. Select a Legal Ending: Choose from the available options, such as Inc., Incorporated, Ltd., Limited, Corp., or Corporation. There is no difference between the legal endings, it is personal preference which one you would like to use.
  3. Gather Required Information: You will need to know the head office address, the legal names and addresses of directors, and the share structure. You can opt for 1 or 2 classes of shares or provide a custom structure.
  4. Conduct a NUANS Report: This mandatory report checks for existing businesses with similar names to avoid conflicts, ensuring your business name is unique and compliant. It also reserves your new corporate name for 90 days while you complete the incorporation process.
  5. Submit Incorporation Documents: Complete the Articles of Incorporation and submit them to the Ministry of Government and Consumer Services to officially register your corporation.
  6. Post-Incorporation Steps: File the Initial Notice within 60 days to verify incorporation details. Set up necessary tax accounts, including corporate income tax, HST, and payroll. Maintain a minute book with all corporate records to ensure compliance and organization.

By following these steps, you can successfully convert a partnership to a corporation in Ontario, ensuring compliance with legal requirements and setting a strong foundation for future growth. 

Are the Details of the General Partnership Transferred to the New Incorporated Company?

The general partnership is a completely separate registration from the newly formed incorporation. When completing the new incorporation, there is no link to your current General Partnership in the corporate registry. You are registering a brand new business as an incorporated company and the previous general partnership registration can be cancelled.

Can I Use the Same Business Name?

Yes, if you wish to use the same business name as you are currently operating, you will simply need to add a legal ending to the business name from these six options:

  1. Inc.
  2. Incorporated
  3. Ltd.
  4. Limited
  5. Corp.
  6. Corporation

When incorporating a company, a NUANS report is required. This report shows similar names to your proposed corporate name and may display your current General Partnership if the proposed corporate name is the same. We will ask you to confirm that you have reviewed the NUANS pre-search results, looking for any exact matches or potential conflicts. As long as no other existing businesses appear to be conflicting, we proceed to incorporate with your confirmation.

start a corporation

What Else is Required to Incorporate?

The information required to incorporate is very similar to the information you provided when registering your General Partnership.

  • Business Address – If you do not have a separate business address, you may use a home address.
  • Your Legal Name & Address – Provide your personal name as listed on your driver’s licence or passport.
  • Share Structure – We provide the option to use standard wording for either 1 or 2 classes of shares, or you can provide your own custom structure.
  • Minimum/Maximum Number Of Directors – This can be a fixed number, or a range. Most businesses choose a minimum of 1 and maximum of 10 directors to leave room for expansion or reduction of directors over time.
  • Your Telephone & Email Address – This is solely for us to communicate with you.

Can I Change by Adding or Removing Directors (Business Owners) to the Incorporation?

Yes, if you wish to add or remove individuals who were part of the General Partnership, but will not be part of the incorporated company, you can do so. The incorporation is treated as a new registration, so you will provide only the information you wish to incorporate with, including the individuals who will be listed as directors of the new incorporated company. 

Incorporation allows for flexibility in issuing shares, including the option to issue nonvoting shares. This helps structure the company’s ownership while keeping control of certain shareholders and directors if desired. Since a corporation is a separate legal entity, changes in directors and the business strategy do not affect its status as a legal entity.

When making these changes, you must update the corporate information accordingly, including office addresses and any other relevant details. These updates are part of the ongoing annual returns, a filing requirement needed to maintain the corporation’s records.

Incorporation Process Timeline & Support

We offer same-day rush Incorporation service Monday through Friday, with orders submitted prior to 2 PM. If you are looking for the cost to incorporate, it varies depending on the specific services and jurisdiction. Regardless of whether you choose Incorporated, Limited, Corporation, or the abbreviated legal endings, we ensure a smooth and efficient process. If you need any further assistance, we are available every weekday from 9:00 am to 5:30 pm. Ontario Business Central has been supporting entrepreneurs and new business owners to establish their businesses across Canada since 1992.  We are here to assist you and make the process of changing from a General Partnership to an Incorporated company seamless and easy, guiding you step by step through the incorporation process.

Complete an Ontario Incorporation

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Ontario Business Central Inc. is not a law firm and cannot provide a legal opinion or advice. This information is to assist you in understanding the requirements of registration within the chosen jurisdiction. It is always recommended, when you have legal or accounting questions that you speak to a qualified professional.