Opening a Limited Partnership in Canada: A Detailed Guide (2025)

Limited Partnership (LP) is becoming increasingly popular in Canada due to its unique advantages in terms of legal liability and management structure. This is a suitable model for foreign entrepreneurs and investors who want flexibility in running their company.

The following article by GLA will help businesses understand the concept of LP, the benefits and disadvantages of opening an LP in Canada, the requirements and procedures. Open a company in Canada from A to Z.

1. What is a Limited Partnership in Canada?

Limited Partnership (LP) is a limited partnership in Canada. It is a business model that includes two main types of partners: General partners and limited partners.

1. General Partners: Responsible for the management and operations of the company. They have full authority to manage the company and at the same time are fully responsible for the company.
2. Limited Partners: Do not participate in the day-to-day management of the company and are only liable to the extent of the capital they have invested in the company.

2. What business purposes are LP companies in Canada used for?

This is a very popular type chosen by foreign Enterprises and Individuals for the following business purposes:

1. Trading company doing business in Canada, USA, EU or other countries.
2. Companies that do business, develop software, and provide IT support to large customers in Canada, the US, and the EU.
3. The company provides online services such as Marketing and website design.
4. E-commerce business, Dropshipping.
5. Company training human resources, providing study abroad and settlement services in Canada.

3. Can foreigners open a Limited Partnership company in Canada?

The answer is yes, Canada does not require a foreign national to have Canadian citizenship or residency in Canada to form an LP company.. A foreign individual investor can assume the role of general partner or limited partner for an LP company. 

Additionally, the company may also apply to become a general partner or limited partner of an LP company.

To register as a general partner, a foreign company needs to apply for Extra Provincial Registration in Canada in the state where the company is located.

The foreign presence registration requirement does not apply to companies registering as limited partners contributing capital to the company. 

All 13 states in Canada allow foreigners to open LP companies.. Among them, popular provinces for establishing LP by foreigners include British Columbia, Ontario, Alberta, Quebec. 

4. Benefits of opening an LP company in Canada

In Canada, the Limited Partnership is one of the most popular types of companies, besides Corporation because of the following advantages:

4.1. Tax incentives

In Canada, limited partnerships are not required to pay state and federal corporate income taxes. 

Instead, the company's profits and income will be divided among the partners and each will be responsible for personal income tax (PIT).

In particular, the income of a foreign partner living in a country that has a double taxation agreement with Canada will not be subject to Canadian personal income tax. Instead, the foreign partner will only pay tax to the country in which he or she lives.

For example: The limited partner of the company is a Vietnamese individual, so this person's income from the Canadian LP company will not be subject to Canadian personal income tax, this individual will only need to pay personal income tax in Vietnam. Because Vietnam and Canada have a double taxation avoidance agreement.

4.2. Limited liability

For Limited Partners, they are only liable for the amount of money they have invested in the company. This helps protect the partners and their personal assets from the legal and financial risks of the company.

Only General Partners will be fully responsible to the company when problems arise.

4.3. Flexibility in management

The LP model provides flexibility in business management, allowing general partners to make day-to-day decisions without the involvement of limited partners.

This makes this model suitable for businesses that have many investors but do not want to be directly involved in operations.

4.4. Easy to raise capital

With the Limited Partnership model, businesses can easily raise capital from potential foreign investors without having to hand over management rights to them.

5. Disadvantages of opening a Limited Partnership company

Besides the above benefits, opening a partnership in Canada still has certain risks such as:

5.1. Unlimited liability of general partners

In this model, the general partner will have unlimited liability for the debts and obligations of the company. 

This means that if the company runs into financial problems, their personal assets can be used to pay off debts.

5.2. Limitation of Rights of Limited Partners

Limited Partners do not have the right to participate in the day-to-day decisions of the company. If they do participate in management, they may lose their limited liability protection and have to become General Partners.

5.3. Difficulty in transferring rights

Transferring the interests of partners in an LP is not always easy, especially when there is no clear agreement on the terms of the transfer.

6. Requirements when opening a Limited Partnership company in Canada

6.1. Company name

• The company name must not be the same as an existing company name in Canada, and must not contain any government-related or restricted terms such as “bank”, “insurance”, or “university”. 
• The company name must have a legal element that reflects the nature of the company such as “LP” or “Limited Partnership”.
• The company name can be in numbers or in words (English or French). For example: The company name is 72941091 or Stellar Norde (The name cannot be the same as a registered name).

6.2. Partners

A Canadian LP requires a minimum of 2 partners, including 1 General Partner and 1 Limited Partner. Both partners can be foreign individuals or foreign corporations.

6.3. Capital contribution

There is no specific regulation on the minimum capital that partners must contribute to LP. Regulations on capital contribution will be stipulated in the cooperation contract between partners.

6.4. Partnership Agreement

To ensure that all rights and obligations of the parties are protected, a detailed partnership contract is required that clearly defines the rights and responsibilities of the General Partners and Limited Partners.

6.5. Company address

A Canadian LP company must have a legal address in the chosen state. GLA will assist businesses in finding the most valid corporate address.

7. Procedures for opening a Limited Partnership company in Canada

With experience in supporting companies to open and effectively manage limited partnerships in Canada, Global Links Asia will present the standard, legal process in this section for businesses to effectively establish a limited partnership as follows:

8. Annual compliance requirements after opening a partnership in Canada

After forming a Limited Partnership (LP) company in Canada, partners need to comply with several legal requirements every year to ensure the company operates legally and avoid unnecessary penalties:

8.1. Annual Return

Each year, the company is required to file an annual report (Annual Return.Annual reprot) with the province where the company is registered. 

This report provides up-to-date information about the company, including its partners and their contacts. Failure to file an annual report may result in the company being dissolved or incurring fines from the state government.

8.2. Tax obligations

LPs are not directly taxed in Canada. However, partners (General Partners and Limited Partners) who are Canadian residents are required to pay tax on the income received from the LP.

8.3. Renewal of operating license

If the LP operates in a specific industry that requires operating licenses, these licenses need to be renewed annually to ensure compliance with the law.

8.4. Company renewal

Every 5 years, LP companies in Canada must renew their registration according to state law. The cost and renewal process will vary from state to state. GLA will support businesses to operate and renew their companies effectively.

9. How does GLA support businesses to open companies in Canada?

Global Links Asia, with experience in consulting and supporting the establishment of a company in Canada in a complete package, with the best cost in the market, ensuring compliance with the law and sustainable operation, will support businesses:

• Canadian state consulting tailored to your company needs.
• Consulting on suitable company types, helping businesses optimize business operations.
• Support for quick and effective company establishment at optimal cost.
• Assisting Canadian companies in complying with laws and annual requirements in a legal, accurate and efficient manner.
• Tax and accounting services and financial reporting according to Canadian standards.
• Register to open and verify a bank account.

10. Frequently asked questions about limited partnerships in Canada

Highlights

• Limited Partnership (LP) is a business model with at least one general partner with unlimited liability and one or more limited partners.
• Foreigners can open and own LPs in Canada, but there are certain Canadian legal representation requirements for General Partners.
• After opening, the LP company needs to file annual reports, fulfill tax obligations, update partner information and renew licenses (if applicable).
• Foreign businesses can also choose to open a corporation in Canada with a clear governance structure.