[BUYING AND SELLING REAL ESTATE IN CANADA - QUÉBEC]
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corporation between the ULC and its shareholder(s). Partnerships / Limited Partnerships These are formed under provincial/territorial law by the agreement of the partners in the case of a general partnership, or the general and limited partners in the case of a limited partnership. General partnerships do not usually require any other formality in order to be created, whereas a limited partnership generally exists only from its registration date. The partnership agreement or limited partnership agreement, as the case may be, takes the place of the certificate and articles of incorporation and by- laws, and will govern the issuance of partnership units and the operations of the entity. 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 liability of the limited partners 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, the limited partner must remain a passive investor rather than an active participant in the operation of the limited partnership. Both general and limited partnerships formed under Québec law or carrying on business in Québec must register with the REQ and provide information analogous to that required of a corporation. Trusts A trust carrying on a commercial enterprise, such as a business, investment, or real estate trust (whether or not profitable), which is not managed by a registered trustee (such as a trust company) must also register with REQ in
the same manner as a sole proprietorship, partnership, or legal person (corporation) within 60 days of beginning operations. All trusts having tax years ending after December 31, 2023 must disclose the name, address, birth date (in the case of individuals), country of residence and social insurance or other tax identification number of all trustees, settlors, beneficiaries and controlling persons ( i.e. , persons having the ability, through the trust terms or a related agreement, to exert influence over trustee decisions regarding the appointment of income or capital of the trust).This includes trusts which own residential properties both within and outside Canada, and those which own shares of private companies that are not currently paying dividends (both of which were previously exempt from the trust filing requirements). Bare trusts employed to hold registered title to real estate or other assets belonging to third parties, which may not be reflected by a formal trust deed, and which previously did not have to file tax returns, are currently exempted from these rules but the government has signaled that the rules will be extended to them as well in the near future. The failure to file an annual Canadian income tax return could result in penalties for each missing year of up to 5% of the fair market
value of the trust ’s assets, plus interest. Nominee or prête – nom agreements
Nominee or “prête - nom” agreements are commonly used in real estate transactions to register property in the name of a nominee corporation, which holds legal title only, with the beneficial ownership retained by the true owner(s). Nominee corporations are often used to collect rent and pay expenses, or to acquire family assets such as a residence. Even if already disclosed in the taxpayer’s tax return,
ILN Real Estate Group – Buying and Selling Real Estate Series
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