Partnership and corporation based on contract and statute, respectively (p. 4)
There is a fundamental aspect of corporations that partnerships do not share: the former are created, operated, and dissolved as dictated by statute….
In contrast, a partnership, even an LLLP, while it may acquire certain characteristics from a statute, is at its heart and soul created, operated, and dissolved by a contract between or among its partners.
Legal personality not a touchstone (p. 4)
[A] Scottish partnership is transparent for UK tax purposes even though it has separate legal personality and confers limited liability on its members…[citing Anson and Memec].
[T]he UK and Scottish Law Reform Commissions concluded that a partnership that had separate legal personality should not, solely for that reason, be classified as a corporation at law…. [f.n. 15... 32, footnote 11; 36, footnote 26; 55, paragraphs 5.38-5.39.]
Hallmarks of partnership (p. 6)
Under some foreign partnership acts, the partners of a partnership may register it to become an LP, LLP, or LLLP. Some such acts provide that such partnerships are separate legal entities, that all of their members have limited liability, and that the partnership's assets are owned by the partnership and not by its members. Nevertheless, provided a partnership's governing partnership act does not deem the partnership to be a corporation, the partnership (including an LP, LLP, and LLLP) will not be treated as a corporation for Canadian tax purposes and will continue to be treated as a partnership, provided it has all the following characteristics:
(a) it has at least two members;
(b) its members are carrying on business with a view to profit; and
(c) there is in force a contractual agreement, express or implied, in writing orally, or by conduct, between or among its members to carry on the business with a view to profit.
As an LLLP has these three fundamental characteristics and a corporation does not, I suggest that a Canadian court would find that an LLLP is a partnership rather than a corporation, regardless of the facts that both have separate legal personalities and that their members have limited liability.
Conclusion that an LLLP or LLP is a partnership for ITA purposes given that has the following hallmarks of partnership:
(a) it has at least two members;
(b) its members are carrying on business with a view to profit; and
(c) there is in force a contractual agreement, express or implied, in writing orally, or by conduct, between or among its members to carry on the business with a view to profit.
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