Canada is generally considered as a country with relatively strict taxation system with no features of an offshore or any other tax-exempt structure. Typically, this is true – most Canadian legal entities are liable to pay taxes on all their domestic and foreign income. Due to this, Canada is perceived by government bodies as well as entrepreneurs as a country with standard taxation system and any legal entity established in its territory – as a reputable and trustworthy vehicle.

Favourable taxation on the territory of Canada
There is one scenario, when Canadian legislation foresees a possibility to register a Canadian legal entity and operate within it with a zero tax rate. This is possible via a legal type of business, called Limited Partnership. LP is a partnership with two or more partners. Each LP is required to have at least two partners: General Partner and Limited Partner. Both types of partners can be either a private person, or a legal entity.

A Canadian LP with foreign partners and no business activity in Canada is not liable to taxation in Canada. This is possible due to the fact, that Canadian tax legislation does not perceive an LP as a separate subject of taxation. Instead, taxes should be paid by the partners in their residence country. Since LP is not considered a Canadian resident for tax purposes, this legal entity is not entitled to advantages of Double Tax treaties between Canada and its partner countries.

Possible applications of a Canadian LP holding structure
There are several popular uses of Canadian LP:

A regular company for business purposes in Canada, EU, US or any other regulated jurisdiction;
An agent working under Sales Agency Agreement;
IT support and software development services or other online based businesses, such as marketing, webstore, auction or website development services;
A holding company due to beneficial tax exemption for LP.
In addition to highly advantageous taxation environment for LPs, there are numerous other benefits to consider before deciding whether Canadian LP is the right choice for your business:

Being a reputable Canadian company;
No requirements regarding the residency of partners;
No requirements for company secretary to be appointed;
No requirements to file annual financial statements;
Possibility to establish a one-man limited partnership, where one person is both – the general partner and the limited partner;
No requirements regarding minimum authorized capital.
Readymade limited partnership (LP) acquisition process
If you are not familiar with Canadian company set-up requirements, or simply have no time to incorporate a new LP, you are able to acquire a ready-made, or shelf company. A ready-made company is a legal entity that has been registered some time ago, but no operational activity is taking place in this company, therefore, it is “sitting on the shelf”. When acquiring a shelf company, you are able to acquire a business with reputable age, which inspires more confidence among suppliers, partners, clients as well as financial institutions.

Shelf companies in Canada generally are sold with the Articles of Incorporation, Certificate of Incorporation, Revenue Canada Tax Business ID number, Corporate Organizational Minutes as well as Resolutions, Corporate Minute Book, by-laws and finally – customized stock certificate. The ready-made company is organized according to the client’s wishes with shareholders, directors and officers indicated by him or her. In case you would like to change the company name, this can be easily done upon acquisition of the shelf company. There are three types of ready-made companies in Canada: Federal, BC and Ontario shelf companies. Each of them is different in terms of partner suitability and other requirements. For example, if you are a non-resident, you are allowed to purchase only a BC shelf company.

Advantages of having a Canadian LP structure
There are numerous benefits of acquiring a ready-made company. First of all, you are able to acquire an already established company without wasting your time on incorporation documentation and procedures. This also means that you are able to start trading as soon as the acquisition process is complete. Additionally, each company becomes more credible when it ages. You will be able to use this benefit when negotiating with partners, attracting new clients, as well as simply opening a bank account or acquiring a credit.