[ESTABLISHING A BUSINESS ENTITY IN CANADA] 80
Provinces of Nova Scotia, British Columbia and Alberta. These entities permit flow-through treatment for profits and losses to their shareholders, although tax treaties may limit the ability to take advantage of this favourable taxation. As the Canadian version does not provide limited liability protection, it is common practice to interpose a single purpose holding corporation between the ULC and the ultimate shareholder(s).
passive investors, rather than active participants in the operations of the limited partnership. BRIEF OVERVIEW OF STEPS TO INCORPORATE/CONSTITUTE EACH TYPE OF ENTITY Corporations / ULCs Both federal and provincial/territorial corporations and ULCs (where permitted) are formed by filing articles of incorporation and notices of directors and head office with the applicable governmental authority. Unless an automatically assigned, numbered corporation is desired, the proposed name must be searched to ensure it would not result in confusion with already existing entities. In the case of a CBCA corporation, the name must also not create confusion with any registered trademarks or pending trademark applications, as intellectual property (patents, trademarks, copyright and industrial designs) is also a matter of federal jurisdiction in Canada. An expanded search, which includes trademarks and may also extend to domain names, is not required in other jurisdictions, but it is advisable to ensure that a business does not later need to change its name after having built up its brand. Once incorporated by the issuance of a certificate of incorporation by the applicable governmental authority, the corporation or ULC must then be “organized” by: (i) the issuance of shares; (ii) the adoption of general, banking and borrowing by-laws; (iii) the confirmation, replacement or addition to the board of directors by the new shareholders; (iv) the shareholders’ ratification of the by-laws; and (v) the nomination by the directors of the various officers (ex., President, Vice-President, Secretary, Treasurer). Multiple shareholders may enter into an agreement governing the operations of the
Partnerships / Limited Partnerships These are formed under provincial/territorial law and are generally governed by such laws and the particular partnership or limited partnership agreement (as the case may be). Typically, in a limited partnership, the general partner (often a shell corporation) is responsible for all the obligations and liabilities of the limited partnership. The limited partners’ liability is restricted to the amount of their respective contributions, provided that they do not become involved in the management of the limited partnership. To retain limited liability protection, limited partners must remain
ILN Corporate Group – Establishing a Business Entity Series
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