Guide to the Ontario LP

Canada is rarely, if ever, associated with tax optimization. That is despite many of its entities offering some of the best tax benefits anywhere in the world. In this guide, I provide an overview of one such entity, the Ontario LP. I also explain how to register one and what the compliance requirements are.

Simon @ FS / Toronto, Ontario

Overview

Canada is a large country, the world’s second largest. It is divided into ten provinces and three federal territories. A province, in the Canadian context, is for all intent and purposes an independent country. Each runs its own education system, health care system, taxation system, police force, law code and in some cases, immigration system. Ontario is the subject of our focus today, and more specifically its Limited Partnership (LP) structure.

The Ontario LP is, as its name implies, a partnership. There must be at least two partners, a general partner and a limited partner, but the same person can act as both making the Ontario LP a suitable option for a single owner company. The partners can be natural persons, legal entities or a mix of both. There are no residency requirements for any of the partners.

The Ontario LP is a pass-through entity for tax purposes. This means that it is not a taxable entity. Instead, the partners must include their share of the profits (or losses) on their own tax returns, in their countries of residence (personal or corporate).

While an Ontario LP can conduct business in Canada, doing so will usually create a filing and tax liability in Canada for the partners. Selling services and products to Canadian customers from abroad, however, will not usually be deemed as conducting business in Canada and as such, will not usually create a Canadian filing and tax liability besides sales tax (if applicable).

Regardless of tax liabilities, an Ontario LP must be renewed with the provincial registry every five years (there is a 210 CAD government fee).

Opening a business bank account in Canada for a Canadian-registered entity is fairly easy. A personal visit is required (for non-residents) but that is usually it (no minimum balance, letter of reference etc). Canadian residents can open an account online in minutes provided that they have a valid social insurance number (SIN). A chequing account can be opened in Canadian dollar and / or US dollar. Savings accounts can be opened in most other major currencies. Most Canadian accounts come with a debit card (usually a mix of Visa / Mastercard and Interac) that can be used worldwide (including online). In exchange for a security deposit (for non-residents), a credit card can also be issued (including USD credit cards). An Ontario LP can also open accounts with the likes of Wise, Airwallex and Currenxie remotely, and these services are in fact a great standalone solution if no traditional bank account is needed.

As for payment processing, an Ontario LP can use services like Stripe and PayPal. Do note that Stripe supports settlements in both CAD and USD.

In the event where an Ontario LP is no longer needed, it can be dissolved in a matter of days, free of charge, by filing a notice with the provincial registry.

Registration

You can register an Ontario LP directly with the provincial government, via the registry portal. You will first need to create a user account, but can do so as a non-resident (not all features will be available, but the LP registration features will be). Once registered, simply follow the instructions and enter your desired company name, address and partner details in the webform and pay the registration fee (210 CAD). Approval is usually immediate once your payment has been confirmed. You can then go ahead and open bank and payment processing accounts. If you require a BN (federal tax ID), for example, to use Stripe, you can apply for one by faxing the CRA (federal tax authorities) a correctly filled RC1 form.

Before you can go ahead with the registration, however, you will need an Ontario address, to act as both the registered and correspondence address for your LP. You can get one via a service such as AnytimeMailbox.

If you decide to use the services of a third party service provider, FS offers a competitive ON LP registration service. You can learn more about it here. The primary benefit of using a registration service is that it will ensure that the registration is done correctly, and support will be provided when it comes to applying for a tax ID, banking and payment processing accounts.