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  • Anmol Trehin

Understanding Limited Partnerships in Quebec

astre legal business lawyer montreal business law, corporate & commercial lawyer, contract law, partnership agreement, limited partnership, Anmol Trehin

The Civil Code of Quebec (the "C.C.Q.") provides the framework for general, limited, and undeclared partnerships. Today we’ll focus on limited partnerships (article 2236 and following of the C.C.Q.). If you need to draft, or review a partnership agreement our business law firm can help.

What is a Limited Partnership?

Partnerships, while governed by the C.C.Q., are created through contracts. Section 2186 of the C.C.Q. defines the partnership contract as the contract through which parties agree to carry on an activity, including operating a business, by contributing property, knowledge, or activities and splitting the profits between the partners.

Limited partnerships are distinguished from general partnerships as having one or more general partners and special partners. The general partners are the only ones authorized to administer and bind the partnership in deals. Special partners contribute to the common stock of the partnership.

Is a Limited Partnership the Same As a Limited Liability Partnership?

In Quebec, a limited partnership is not the same as a limited liability partnership. In a limited liability partnership, the partners remain liable for their acts (and omissions). There is no general partner and special partner. Generally, a limited liability partnership is created between professionals (lawyers, accountants, etc) and its rules are governed by those applicable to general partnerships under the C.C.Q. and the Professional Code of Quebec.

Why Would You Form a Limited Partnership?

Limited partnerships are often used for investment purposes, where the partners do not want to be involved in managing the business. On the other hand, general partners can bring in investors without ceding control of their business. For instance, with a limited partnership, a real estate developer may bring in investors to help with the purchase of a large property, but retain control over its development.

What Is the Role of the General Partner?

The general partners retain the power, rights, and obligations to manage the business. This includes making decisions and entering into agreements on behalf of the partnership. However, they must report their administration to the special partners.

What Is the Role of the Special Partner?

The special partner furnishes a sum of money or other property at the time the common stock is established. In addition to this initial contribution, the partnership contract may also stipulate that special partners must make further contributions to common stock.

Business-wise, the special partner can only provide advice regarding the management of the firm.

The Special Partner Register

The general partners must maintain a register that is stored at the principal establishment of the business. This register contains the name, address, and information about the contribution made by each special partner.

Filing Taxes as a Partnership

Partnerships are not subject to income tax. It’s the responsibility of each partner to report their share of the partnership income or loss on their personal income tax return. Limited partners that sustain a loss are subject to certain rules. However, the special partner’s share of all the partnership losses is deductible up to an allowable amount, calculated using the partner’s at-risk amount.

Withdrawing From a Limited Partnership

A general partner can withdraw from the partnership by transferring their interest to a new general partner. The partnership agreement can further state that a general partner will be removed under certain conditions, like becoming insolvent or bankrupt.

The special partner may not withdraw any part of their contribution from the partnership unless two conditions are met: (1) the majority of the other partners' consent; and (2) the property remaining after the withdrawal is enough to cover the debts of the partnership.

Dissolving the Limited Partnership

There are many situations where the partnership can be dissolved. We’ve listed some of them below.

1. When General Partners Are Unable To Act

Where the general partners are no longer able to act and are not replaced within 120 days, the partnership is dissolved. During this period, the special partners may perform acts of simple administration required to manage the business.

2. Causes Indicated In The Partnership Agreement

Partnership agreements may also specify the reasons for dissolving a limited partnership. This includes achieving the objective for which it was created, the impossibility of achieving the objective, or if all the partners consent.

3. Arrival of Term

Where the partnership agreement states the start and end dates, the partnership will dissolve at the arrival of the term.

4. Court ordered dissolution

In certain cases, a court may also order the dissolution of the partnership for a legitimate cause. For instance, if a partner is found guilty of fraudulent behaviour or the partnership agreement is no longer viable, the court may order the dissolution of the partnership.


Having your agreement drafted by a business lawyer ensures that you have a strong foundation from which to build your limited partnership. Our Montreal-based business law firm is available for virtual consultations across Quebec. Schedule an appointment to get started.


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