Limited partnership (LP)

A buyer or seller may meet a limited partnership when a business is held in a partnership rather than a corporation. Under both Acts, a general partner carries the liabilities of a partner in an ordinary partnership, and a limited partner who takes part in the control of the business can be liable as a general partner. This entry covers Alberta and Ontario only; check the Act where the partnership was formed. See whether buying into a partnership is the same as buying shares.

How it works

Alberta’s Act, subject to section 52(2), forms a limited partnership when a certificate is filed with and recorded by the Registrar. Ontario’s forms one when a declaration is accepted for filing. In both, a general partner has no authority, without the written consent or ratification of all the limited partners, to admit a person as a general partner, or as a limited partner unless the partnership agreement gives that right. Both Acts also say a limited partner whose surname appears in the firm name, contrary to the Act, can be liable as a general partner to a creditor who lacked actual knowledge. Ontario’s Act requires the general partners of a limited partnership, other than an extra-provincial one, to keep a current record of limited partners.

What to ask

• Who the general partners and limited partners are, and under which province’s Act the partnership was formed
• What the partnership agreement says about admitting or replacing partners
• Whether the limited partners’ consents are in writing

Compare a general partnership.