Original Publish Date: Sept 28, 2016
As of October of 2021, the Ontario Government introduced the new Ontario Business Registry taking over for the old Onbis system. The Business Name Act was revised and with those changes, much of the information related to the act including wording associated with different business identities has changed. A General Partnership is now called a Firm Name For A General Partnership and the classification group of Master Business Licence is now called Business Name Registration.
The business structure of a Firm Name For a General Partnership or General Partnership specifically is available when two or more individuals or two or more corporations decide to operate a business together. The partnership provides a joint venture as an unincorporated business in Ontario. Just as with a Sole Proprietorship, the General Partnership between two or more individuals does not limit liability by the partners and they remain personally liable for the risk associated with the General Partnership. With a General Partnership between two or more corporations, the liability protection is tied to the existing corporate entity which limits liability to each corporate partner within their incorporated business collaboration.
Are there any other changes under the new Ontario Business Registry in Ontario?
Yes, there are a few additional changes under the new Ontario Business Registry. They include the following:
- Naics code – as part of the requested business activity, the new system also requires you as a business owner to provide a 6 digit industry code to the general business practice of the Firm Name For the General Partnership.
- Company Key – the company key is a new feature provided when you register your business that provides more identity protection to the registered business. The company key consists of 9 digits and is provided when the General Partnership is established.
- Official Email Address – the system connects the registration information to the address as provided. Ensure your email address that you intend to use for the operation of the business and one that is monitored on a regular basis.
- A secondary business under the new OBR can operate under a General Partnership as a trade name or DBA. This allows the existing General Partnership to operate a second business name under the General Partnership. This option is completely new under the Ontario Business Registry.
What’s the difference between a General Partnership and a Limited Partnership?
A Limited Partnership is not as commonly used as a General Partnership. Limited Partnerships are established when there are individuals who wish to invest in a business operation as silent partners and there is an individual who wishes to bring on investment partners. There is a general partner who is usually the one that has the business opportunity and has risk associated with that business venture where his or her risk is unlimited. The limited partners are invested in the opportunity but are not involved in the day to day operation of the business. A simple example of a Limited Partnership is an Exchange Traded Fund or ETF where the general partner is the individual or owner (general partner) and has an investment opportunity and the limited partners (individuals who buy into the fund) with the idea of opportunity and financial benefit.
Details about registering a General Partnership
- Owned by more than 1 individual or corporation
- Registration exists for a 5 year period and is renewable
- Taxation for the business is included in the individuals personal tax return filing when individuals register
- Easy to establish and cancel
- Inexpensive to start a business
Things to consider when completing a General Partnership
- Name of Business Not Protected
- Personal liability
- Taxation Inflexible
- General Partnerships limited changes
- Limited access to credit
- Small Organization
- Restrictions on wording for General Partnership registrations.
No Name Protection
One of the biggest drawbacks for many individuals in registering a Firm Name For A General Partnership, General Partnership or GP is the lack of protecting the business name. The business name is the brand for the business and without the ability to protect the business name, it leaves that name vulnerable to being used or copied by others. A secondary item to consider is that as your business is registered as a GP, other individuals can incorporate a same or similar name to your registered business and gain name protection for the business name. This does not prevent you from continuing to operate that business name however if at a later point you decide to incorporate, the secondary business may have the name protection and you may be in a position of infringing on their business name protection.
A secondary issue to consider strongly is the personal risk you are putting yourself and your family at by registering a General Partnership. There is nothing that limits liability of the partners of the operation and each individual is responsible for the business, the risk associated with the business and the personal assets that are exposed under this business entity. Limited Liability companies are only accessible if incorporation is completed.
Taxation Inflexible – Individual Partners
When 2 or more individuals come together to register a General Partnership, those individuals do not have tax advantages associated with an incorporated business. The individuals must file the reported income on the personal tax return by completing a Form T1. The profits and losses should be gathered for the business and each partner should share a specific burden of that taxable income each year. If the operation of the business is established where one partner has 75% of the business asset and therefore the tax benefit, that individual should file the tax return each year in correspondence to what was originally established. A Partnership agreement can initially prepare each partner for the responsibilities, obligation and tax consequences for each partner.
Taxation for General Partnership – of 2 or more corporations
With the business entity of two or more corporations determining there is value in registering a business partnership with other corporations for mutual business opportunities and benefits, the existing corporations are the partners and therefore have the tax advantages of the business being under the corporate umbrella instead of the tax disadvantages of the personal owners of the GP. There is also the opportunity for both individuals and corporations to come together as partners in a General Partnership and the taxation would be determined by whether the entity is an individual or corporation as listed.
Limited Access to credit
Understanding General Partnerships has another key element to consider which is money and finance. Partners are personally responsible for the tax consequences when registered by individual owners. Those individually who are owners are also personally responsible for any business loans that are required for the business. The General Partnership is not a separate legal entity outside of the people who own it and therefore the GP has no legal right to obtain business loans as a stand alone debtor. If you wish to obtain loans for the business growth or would like to purchase commercial real estate as an asset instead of leasing space, you and the other business owners will be required to bind personal assets or funding to achieve business indebtedness.
There are different types of businesses including registered or incorporated businesses. The registered businesses including the General Partnership is typically viewed as a small operation. If your clientele tends to be business to business, you may consider incorporation where the operation is considered bigger and more significant and carries the benefit of having liability protection.
Restriction on wording for General Partnership
The business name is required to be a profit business and not a not for profit business. Businesses operating as churches, associations, clubs, leagues cannot be registered as a GP.
The wording of the business must not have profanities, political statements, appear to be a single owner or incorporated. Corporations have legal endings such as Ltd, Inc. or Corp. These are not available for General Partnerships however words such as Holding, Company, GP are available.
The pro’s to registering a General Partnership
- General Partnerships are easy
- Getting a Partnership agreement done
- Changing from General Partnership to Sole Proprietorship or Incorporation
- Easy to cancel a General Partnership
General Partnerships are easy to form and run
Registering a General Partnership is easy and it gives the owners access inexpensively to start a business to determine the likelihood of business advancement.
Getting a Partnership Agreement done
It is recommended that the partners agree to doing a partnership agreement from the onset of the business to ensure each person is on the same page and a business plan is also advisable. The partnership agreement includes details of what percentage each partner has invested and is liable for, it also speaks of the percentage of taxation of the business profits and losses for each owner along with the responsibilities of each and risk associated. Typically, the agreement will also disclose what happens if the partnership dissolves or if a partner unfortunately dies. All of these things should be considered at the forefront of any business opportunity with others.
Changing from a General Partnership to a Sole Proprietorship or Incorporation
If a General Partnership doesn’t have the business opportunities expected, it is very easy to cancel the registration and if one person decides to continue, that person can look at registering a Sole Proprietorship to continue on as a single business owner. There is also the opportunity to look at incorporating. Incorporating is viable for the General Partnership if the business grows or becomes more complicated than originally anticipated as long as the business name remains available or for the one individual who decides to continue the business when the GP is no longer applicable.
Easy to cancel a General Partnership
It is as easy to cancel a General Partnership as it is to form one, at least from a technical aspect. The same form to register is also used to change or cancel a registration. Any person or corporate entity can cancel the General Partnership with the Province of Ontario without the need of the other owner. This is also from a technical perspective. If there is a legal obligation to advise, this should be adhered to.
Is there any difference between a Partnership and a General Partnership?
Depending on the jurisdiction you are registering in, there is different terminology. General Partnership, Firm Name For General Partnership, Partnership or GP all mean the same thing, if you are operating a business as a group that has unlimited liability. The General Partnership is only available with each Province or Territory and is not available as a legal formation at the federal or Canada level.
Why do individuals register a General Partnership?
A General Partnership is a useful tool to start a business whether the business is a grassroots company, a part time business, a joint venture between colleagues or friends or a new opportunity with a business that have like minded interests.
The main things to keep in mind when registering a General Partnership are:
- How important is name protection to the business?
If you are spending what you consider to be a fair amount of money for promotional material, advertising, social media whereas the business name is going to be viewed by a larger segment of the population, name protection for the business may be an important aspect of protecting the brand you want to establish with your business. If you are spending money to promote the business and are concerned about protecting the name or brand of the business, incorporating the business where name protection is available may suit your needs.
- How important is liability protection?
When registering a General Partnership, the business is not a separate entity from you and the other individual owners as it is when you incorporate a business. If the business you are operating is, in your mind, at higher risk for personal or property damage from the activities associated with the business, it may be a good idea to view incorporation as an alternative where the business is a separate entity from you as individuals. You may also want to speak with your insurance broker or insurance company regarding obtaining business insurance in the event of risk.
- What about taxation?
A General Partnership is taxed and filed under the personal taxes of each individual who operates that business. If the revenues associated with the business are or will be higher than the needs of the individual owners, it may be an option to look at incorporation or at minimum a conversation with an accountant or tax expert to advise you on what would work best for you in your specific circumstance.
Other blogs that may be of assistance for a General Partnership Registration
10 steps to registering a new Sole Proprietorship or General Partnership
How to change from a registered business to an incorporated business.
If after consideration, you would like to proceed to register a General Partnership in the Province of Ontario, please click the button below.
If you wish to view an Ontario incorporation as an alternative to registering a General Partnership, you may do so here:
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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.