A partnership is an association or relationship between two or more individuals, corporations,
trusts, or partnerships that join together to carry on a trade or business.
Each partner contributes money, labour, property, or skills to the partnership. In return,
each partner is entitled to a share of the profits or losses of the business. The business
profits (or losses) are usually divided among the partners based on the partnership
agreement.
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Like a sole proprietorship, a partnership is easy to form. In fact, a simple verbal
agreement is enough to form a partnership. However, most partnerships are governed by a
written agreement setting out rules for partners entering or leaving the partnership, the
division of partnership income, and other matters.
The partnership is bound by the actions of any member of the partnership, as long as these
are within the usual scope of the operations
A partnership by itself does not pay income tax on its operating results and does not file
an annual income tax return. Instead, each partner includes a share of the partnership
income or loss on a personal, corporate, or trust income tax return.
Each partner also has to either file financial statements or copies of the forms below that
apply to their situation (computer-generated version of any of these forms is acceptable):
Form T2125, Statement of Business or Professional Activities
A partnership that carries on a business in Canada, or a Canadian partnership with Canadian
or foreign operations or investments, has to file Form T5013, Statement of Partnership
Income, for each of the fiscal periods of the partnership where, one of the following
occurs:
1. At the end of the fiscal period, the partnership has an absolute value of revenues plus
an absolute value of expenses of more than $2 million, or has more than $5 million in
assets.
2. At any time during the fiscal period:
i) The partnership is a tiered partnership (has another partnership as a partner or is
itself a partner in another partnership)
ii) The partnership has a corporation or a trust as a partner
iii) The partnership invested in flow-through shares of a principal-business corporation
that incurred Canadian resource expenses and renounced those expenses to the partnership
iv) The Minister of National Revenue asked in writing for a completed Form T5013, Statement
of Partnership Income
Registering for the GST/HST:
Since a partnership is considered to be a separate person, it may be required to register
for and collect GST/HST if it provides taxable supplies in Canada. For more information, go
to guide RC4022, General Information for GST/HST Registrants.
Provincial statutes in Canada recognize three types of partnerships:
General partnerships;
Limited partnerships; and.
Limited liability partnerships.
References:
https://www.canada.ca/en/revenue-agency/services/forms-publications/forms/t2125.html
https://www.canada.ca/en/revenue-agency/services/forms-publications/forms/t5013.html