Running a Partnership Business in Canada

When setting up a business, there are three main structures that can be used. These include a business partnership, sole proprietorship, and a corporation. A partnership involves a relationship or association between two or more individuals, corporations, trusts, or partnerships that have joined together to carry on business or trade.

The partners contribute money, labour, property, skills, or other assets and resources to the partnership. They are then entitled to share business profits or losses. These are divided based on the partnership agreement. While corporations require registration and more processing, sole proprietorships and partnerships are much simpler to form. Most partnerships have a written agreement that sets out rules for partners to enter or leave it, how to divide the income, and other relevant topics.

Paying Taxes as a Business Partnership

Partnerships do not pay income tax on operating results or file an annual income tax return. Instead, each partner files their own personal, corporate, or trust income tax return in which they include a share of the partnership income or loss. Even if the share of income was received in cash or as a credit to the partnership’s capital accounts, it still needs to be reported. Depending on their situation, a different form applies and needs to be filed. Here is a list of the forms for different business partnership activities:

Form Number	Form Name
Form T2125	Statement of Business or Professional Activities
Form T2042	Statement of Farming Activities
Form T2121	Statement of Fishing Activities
Form T1163	Statement A – AgriStability and AgriInvest Programs Information and Statement of Farming Activities for Individuals
Form T1164	Statement B – AgriStability and AgriInvest Programs Information and Statement of Farming Activities for Additional Farming Operations
Form T1273	Statement A – Harmonized AgriStability and AgriInvest Programs Information and Statement of Farming Activities for Individuals
Form T1274	Statement B – Harmonized AgriStability and AgriInvest Programs Information and Statement of Farming Activities for Additional Farming Operations
Form T5013	Statement of Partnership Income

Business Partnerships that Need to File the T5013 Form

The T5013 form is only filed for a partnership that carries on business in Canada, or a Canadian partnership with Canadian or foreign operations or investments. It has to be done for each fiscal period in the following situations:

• The partnership has an absolute value of revenues plus an absolute value of expenses totalling more than $2 million.
  • Alternatively, they meet this criteria if they have more than $5 million in assets.
• At any time during the partnerships fiscal period:
  • It is a tiered partnership.
    • This means that another partnership is a partner or it is a partner in another partnership.
  • The partnership has a partner that is a corporation or trust.
• They invested in flow-through shares of a principal-business corporation which incurred Canadian resource expenses. These expenses were then renounced to the partnership.
• The Minister of National Revenue requested in writing for a completed Form T5013.

The Two Types of a Business Partnership