Limited Liability Partnerships for Non-Residents: A Comprehensive Guide

A limited liability partnership (LLP) is a partnership whose partners are shielded from most partnership debts, though each partner stays liable for their own negligence. For a non-resident who wants an LLP for an ordinary business, British Columbia is the only province that allows it. BC's Partnership Act lets any partnership register as an LLP, while Ontario, Alberta, Saskatchewan and Manitoba allow LLPs only for professions whose governing law permits them, such as law or accounting firms. An LLP is not a separate legal entity and is not a tax shelter. Non-resident partners who carry on business in Canada through it are taxable in Canada on that income and face filing and withholding rules. This guide explains what an LLP does and doesn't do, how to register one in BC, and the tax points to raise with an advisor.

Which provinces allow an LLP for non-professional businesses?

So a software, consulting, e-commerce or trading business run by non-residents can be an LLP only in BC. A tech startup in Ontario or Alberta simply can't use the structure. If an LLP doesn't fit, compare a limited partnership, an Ontario LP for non-residents or a corporation.

What an LLP's liability shield covers, and what it doesn't

The liability shield is often oversold. A partner in an LLP is not "liable only up to their investment". That describes a limited partner in an LP. Under BC's Partnership Act:

Protected (s. 104(1))

• A partner is not personally liable for a partnership obligation merely because they are a partner.
• A partner is not personally liable for the partnership's contractual obligations.

Not protected

• Your own negligence or wrongful acts.
• Others' negligence you knew about, by another partner or an employee, if you didn't take reasonable steps to prevent it.
• Partnership property: your share of the partnership's assets is still exposed to partnership creditors.
• Director-type liabilities: partners are personally liable for a partnership obligation wherever directors of a corporation would be liable for the same obligation (s. 105).
• Debts from before registration: obligations that arose before the partnership became an LLP aren't covered (s. 106).
• Personal guarantees you sign, for example for a lease or bank loan.

BC also restricts distributions to partners when the LLP couldn't pay its debts afterwards. A partner who receives such a distribution can be made to repay it (ss. 112–113).

Is an LLP a separate legal entity?

No. Under Canadian partnership law, a partnership, including an LLP, is not a legal person separate from its partners. The CRA treats a partnership as a separate person for GST/HST purposes, and the LLP carries on business under its firm name, but it's still a relationship among its partners. In practice the partners, not the LLP, are the taxpayers. If you need a true separate legal entity, form a corporation.

How to register a BC LLP as a non-resident

Step 1: Form a partnership with at least two partners

BC registers an existing partnership as an LLP, so you need two or more partners and a written partnership agreement. Partners can be individuals or corporations, and the Partnership Act has no partner residency requirement.

Step 2: Get the name approved

File a BC Name Request ($30). An approved name is reserved for 56 days, so register within that window. The firm name must end with "Limited Liability Partnership" or "LLP", or the French forms "Société à responsabilité limitée" / "SRL" or "Société en nom collectif à responsabilité limitée" / "SENCRL" (s. 100). See our BC business name guide.

Step 3: Arrange a registered office in BC

Every BC LLP must have a registered office in British Columbia (s. 108): a physical delivery address, not a P.O. box, where legal documents can be served. The LLP must also keep its current list of partners there. Non-residents usually use a BC service provider's address.

Step 4: File the registration statement

File the registration statement with BC Registries. It includes the reserved name, the registered office's mailing and delivery addresses, and confirmation of whether it's a professional partnership. Once it's registered, notify existing clients in writing that the partnership is now an LLP (s. 107).

Step 5: Keep it in good standing

• File an annual report within 2 months after each anniversary of registration (s. 110).
• Promptly file amendments when registered information changes (s. 111).
• Get a CRA Business Number and, where required, register for GST/HST.

We can handle the BC filings and provide the BC address. See our LLP registration service.

An LLP from elsewhere doing business in BC

A partnership already registered as an LLP in another jurisdiction can register in BC as an extraprovincial LLP. If it has no registered office in BC, it must appoint an attorney: an individual resident in BC or a BC company (s. 122).

Tax considerations for non-resident partners

An LLP doesn't remove Canadian tax. It changes who pays it. The main points to raise with a cross-border tax advisor:

• Flow-through: the LLP itself doesn't pay income tax. Income is allocated to the partners and taxed in their hands. A non-resident partner whose share comes from carrying on business in Canada is generally taxable in Canada on it and must file a Canadian return.
• Withholding on services: a Canadian payer of fees for services performed in Canada by non-residents generally must withhold 15% (Income Tax Regulation 105). For a partnership, it applies to the non-resident partners' share. The withholding is a prepayment, not the final tax. Waivers can be requested from the CRA in advance.
• Part XIII withholding: some passive payments, such as certain interest, dividends, rents and royalties, made to a partnership with non-resident members can be subject to Part XIII withholding tax.
• Tax treaties can reduce withholding rates or give treaty relief in some cases, but they don't automatically exempt Canadian business income. Relief usually has to be claimed.
• T5013: the partnership must file a T5013 Partnership Information Return if, at fiscal period end, its absolute revenues plus absolute expenses are more than $2 million or its assets are more than $5 million, or if other CRA conditions apply.
• Home country: your own country may tax the same income, or classify a Canadian LLP differently. Check before you set up.

This is general information, not tax advice. Get advice from a Canadian cross-border tax professional before choosing a structure.

LLP, LP or corporation: which suits a non-resident?

• BC LLP: all partners can take part in management with a partial liability shield. Available for any business only in BC. Taxed in the partners' hands.
• Limited partnership: investors are protected up to their contribution but must stay passive. The general partner, often a corporation, has unlimited liability. See our limited partnership guide.
• Corporation: a separate legal entity with limited liability for shareholders. It pays its own corporate tax. Most provinces have no director residency rule, though federal corporations need 25% resident Canadian directors. See our BC incorporation guide.

For more on LLPs in general, read our overview of LLPs in Canada.