[ESTABLISHING A BUSINESS ENTITY IN CANADA] 77
common practice to interpose a single purpose holding corporation between the ULC and the ultimate shareholder(s). 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 (which is 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 passive investors, rather than active participants in the operation of the limited partnership.
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 (federal) 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 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. Multiple shareholders may enter into an agreement governing the operations of the corporation or ULC. They may also shift some or all of the powers and related liabilities of the board to the shareholders (known as a “unanimous shareholders’ agreement”, not because all of the shareholders are party to it, but because of its effect on the decision-making process). Partnerships / Limited Partnerships These are generally formed by the agreement of the partners in the case of a general partnership, or of the general and limited partners in the case of a limited partnership. General partnerships usually do not require any
BRIEF TO INCORPORATE/CONSTITUTE EACH TYPE OF ENTITY Corporations / ULCs Both federal and provincial/territorial OVERVIEW OF STEPS corporations and ULCs (where permitted) are formed by filing articles of incorporation and notices of directors and head office with the applicable governmental authority.
ILN Corporate Group – Establishing a Business Entity Series
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