A Canadian Partnership Agreement is a foundational legal contract that establishes the terms of a business partnership between two or more parties. It defines the rights, obligations, and economic interests of each partner, replacing the default rules imposed by provincial Partnership Acts with terms that reflect the partners' actual intentions.

Partnership law in Canada is provincial. Each province has a Partnership Act (Ontario's Partnerships Act R.S.O. 1990, c. P.5; BC's Partnership Act R.S.B.C. 1996, c. 348; Alberta's Partnership Act R.S.A. 2000, c. P-3) that provides default rules governing partnerships without written agreements. These defaults include equal profit sharing, equal management rights, and joint and several liability for all partners — regardless of each partner's actual capital contribution or involvement. A written partnership agreement overrides these defaults with customized terms.

For Canadian tax purposes, partnerships are flow-through entities under the Income Tax Act. The partnership does not pay income tax directly. Instead, each partner includes their share of partnership income or losses on their personal (T1) or corporate (T2) tax return. The partnership itself must file an annual T5013 Partnership Information Return with the CRA, reporting each partner's allocated share of income, losses, and other amounts. If the partnership's annual taxable supplies exceed $30,000, it must register for GST/HST under the Excise Tax Act.

Partnerships operating under a name other than the partners' personal legal names must register the business name under the applicable provincial Business Names Act (e.g., Ontario's Business Names Act, R.S.O. 1990, c. B.17) within the prescribed timeframe — typically 60 days of formation in Ontario. Failure to register can affect the partnership's ability to commence legal proceedings.

When two or more individuals are starting a business together and need to formalize their capital contributions, profit-sharing arrangement, decision-making authority, and exit terms before the first dollar changes hands.

When forming a limited partnership where general partners manage the business and assume unlimited liability, while limited partners contribute capital and receive returns without participating in management or exposing themselves to liability beyond their investment.

When partners are making unequal contributions — one providing $200,000 in capital and another providing industry expertise and labour — and the profit-sharing and management structure must reflect these different contributions rather than the equal-split default.

When a professional services firm (law, accounting, medicine, engineering) is structuring a partnership and needs to address partner admission criteria, compensation formulas, retirement provisions, and compliance with provincial professional regulatory requirements.

When an existing business partnership that has been operating informally wants to formalize terms before admitting a new partner, obtaining bank financing, or entering into significant contracts that require evidence of the partnership's governance structure.

Without a partnership agreement, partners face provincial statutory defaults that rarely match their expectations: equal profit sharing regardless of capital invested, any partner can bind the partnership to contracts, and the death or withdrawal of any partner automatically dissolves the partnership.

Partnership Type and Registration — Identify whether the partnership is general, limited, or limited liability, and reference the applicable provincial Partnership Act. Include the partnership's business name and the requirement to register under the provincial Business Names Act.

Capital Contributions — Each partner's initial and ongoing capital commitments (cash, property, equipment, intellectual property, or services), with clear valuation methods for non-cash contributions. Specify what happens if a partner fails to make a required capital contribution.

Profit and Loss Allocation — The specific formula or percentage for distributing profits and allocating losses. This allocation directly determines each partner's CRA tax reporting on the T5013. Address whether allocations follow capital contributions, services rendered, or a hybrid model.

Management Authority and Voting — Which partners have authority to make day-to-day management decisions, which decisions require majority or unanimous consent (e.g., incurring debt above a threshold, admitting new partners, selling major assets), and the voting mechanism.

Partner Duties and Restrictions — Each partner's obligations to the partnership, including time commitment, fiduciary duties, restrictions on competing businesses, and approval requirements for outside business activities.

Admission of New Partners — The process, approval requirements, and conditions for admitting new partners. Provincial Partnership Acts generally require unanimous consent for admission of new partners unless the agreement specifies otherwise.

Withdrawal, Retirement, and Expulsion — Buy-out provisions for departing partners, including the valuation method (book value, fair market value, formula, or independent appraisal), payment terms, and non-compete or non-solicitation obligations post-departure.

Death or Incapacity — What happens when a partner dies or becomes incapacitated: whether the partnership continues or dissolves, how the deceased partner's interest is valued and paid to their estate, and whether remaining partners have a right of first refusal.

Dissolution and Winding Up — The events triggering dissolution, the process for winding up affairs, paying creditors, and distributing remaining assets to partners according to their interests.

Governing Law — The province whose Partnership Act and laws govern the agreement, the courts with jurisdiction, and the preferred dispute resolution mechanism.