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Partnerships

Region: Ontario Answer # 191

When two or more individuals join to do business for profit but do not incorporate, they have formed a partnership. Partnerships are treated differently from other types of businesses for tax purposes.

Taxable income

There are four main tax implications to owning a partnership interest. They are:

  1. The business income of a partnership is divided between the partners and included on each partners’ personal income tax form; the partnership does not file a separate tax form.
  2. If the business has suffered a loss, the partners can deduct the loss from any other employment income they receive. This will lower the overall income of an individual partner and reduce the amount of income tax he or she must pay.
  3. If the business has made a profit, the profits are taxed at each partners’ personal income tax rate; and
  4. Because the partnership is not a separate legal entity, the partners cannot take advantage of tax deferral opportunities available with corporations.

 

Fiscal period

As a partner, you may be able to apply to use a fiscal period other than a calendar year for calculating and paying taxes, but you will not usually be able to defer taxes this way. Each partner pays income tax for the calendar year in which the partnership earned it, even if the partner does not receive payment until the next calendar year.

Other taxes

A partnership may also be required to collect and remit other types of tax. The most common are HST and payroll tax.

For general information, contact Canada Revenue Agency.

For legal advice in deciding which form of business is right for you, assistance with setting up your business, and for all other business matters, contact our preferred business lawyers, Singer Business Law .

 

For help filing your tax returns, contact H&R Block.

For legal advice and assistance with tax planning, a CRA tax dispute, or other tax issues, contact our preferred Tax lawyers and see who’s right for you: 

Barrett Tax Law

Tax Chambers LLP


Tax Chambers Tax Law Ontario All Topics Sept 2017Tax Chambers Tax Law Ontario All Topics Sept 2017

H&R Block Tax Law Ontario All Topics Sept 2017H&R Block Tax Law Ontario All Topics Sept 2017

Barrett April 2017 Ontario Tax Law Topic 191Barrett April 2017 Ontario Tax Law Topic 191

Singer Aug 2017 Ontario Business 191Singer Aug 2017 Ontario Business 191



								

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