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How to determine if a partnership exists

Region: Ontario Answer # 215

 

In law, the question of whether a partnership exists must be determined by the real intentions of all the parties, which is determined by their conduct. In determining the real relationship, the court will look at the business relationship of the parties based on the substance rather than the form of their relationship. The court will consider everything that is available, such formal contracts, documents, advertisements, correspondence and the evidence of witnesses.

The factors that must be present to find that a partnership exists have been generally agreed upon by the court. The most common factors that the court considers are:

  1. The formal registration of a partnership,
  2. The contribution by the parties of money, property, knowledge, skills or other assets used in the business,
  3. A joint property interest in the property of the business,
  4. A mutual right of control or management of the enterprise,
  5. The expectation of profit, and
  6. The right of each party to participate in the profits.

View to profit

The Partnerships Act of Ontario states that a partnership exists if the parties carry on a business in common with a view to profit. Therefore, even if the parties intend to form a partnership and address themselves as partners or use the word “partnership,” a partnership will not exist unless they intend to share profits. If profit is to be generated, but is not to be common to the partnership but individual to the participants, then the necessary common profit element will not be found to exist.

Formal registration

If there is no other evidence, the registration of a partnership under the Business Names Act (Ontario) will likely be sufficient to determine that a partnership has been created. However, it is important to understand that it is not necessary to formally register a partnership to create it, nor is registration absolute proof that a partnership exists.

Contribution of each party

Another factor that the court considers is contribution. Some form of contribution by each of the parties, and an indication of interdependence, are normally enough to allow the court to decide that a partnership has been created.

NEW Ontario Business Registry

Businesses can now complete over 90 transactions online through the new Ontario Business Registry. This includes:

  • register a new business name
  • renew an existing business name
  • dissolving an existing business
  • incorporate, dissolve and change a corporation or not-for-profit or charity
  • search for a business or not-for-profit corporation
  • file notices and other documents under other business law statutes

Currently, mailing or emailing documents is also still available.

Registering existing business: Existing businesses and not-for-profits who wish to access their profile or file documents using the Registry will require a Company Key. Businesses can submit a request for their company key at Ontario.ca/BusinessRegistry.

New businesses and not-for-profits should visit the Ontario Business Registry: all services page for instructions on how to create and register their new business.

Anyone can do a free search of the Ontario Business Registry to get basic information about a business or not-for-profit corporation.

Some offices closed

As a result of the launch of the new Registry, six service counters across Ontario will no longer endorse articles submitted under the Business Corporations Act. As well, the ServiceOntario counter at 375 University Avenue in Toronto has closed. Visit ServiceOntario for information on what offices are still open and what transactions can be completed in-person.

More info

More information about starting and operating a business in Ontario can be found from Government of Ontario, Business and Economy services, or the Federal Government’s Small Business Services.

Get legal help

For legal advice and assistance with determining if a partnership exists, forming a partnership or starting another form of business, and for other business issues, contact our preferred experts at Kalfa Law, or call them now at 1-800-631-7923.


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