Partnership Agreement

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Starting and Ending Partnerships In Ontario

Disclaimer: This article on partnerships in Ontario is intended for the purposes of providing information only and is to be used only for the purposes of guidance. This article is not intended to be relied upon as the giving of legal advice and does not purport to be exhaustive.

Going into business with someone else can be a great way to increase your chances of success. You can share the workload, knowledge and resources while also having someone to hold you accountable for your decisions. Working with a partner allows you to expand your market reach, attract more customers and build relationships within the industry. 

However, going into business with someone else means you must take extra steps to set yourself up for future success. This article will discuss the importance of a partnership agreement and what happens when you want to end your partnership. 

Two people setting up partnerships in Ontario

Starting a Partnership on the Right Foot

When it comes to starting a business partnership, taking the time to ensure that everything lines up can save you and your partner a lot of headaches down the road. A strong initial agreement should outline how to share any profits, how to make decisions, and what happens if one of you wants out of the arrangement.

While you may be excited to being your venture, making sure that everything is in order should be your first priority. Doing so will help you avoid potential conflicts, confusion, and legal issues that can arise from not having a clear agreement set up.

Setting Up Your Partnership Agreement

If you’re serious about forming a business partnership, you must first determine how your business will be structured. Typically, partnerships in Ontario are formed through general partnerships or corporations.

Partnerships in Ontario

Partnerships in Ontario are defined as “the relationship between two or more people who agree to carry on a business together with the view of making profit.” This type of structure is often seen in small businesses, as it allows for shared ownership and responsibility among partners. A partnership agreement governs the arrangement and outlines the rules and details of the partnership.


If your business is a corporation, then each partner holds a certain percentage of the company’s shares and are shareholders. This type of structure is more complex than general partnerships but can offer individual liability protection and more tax advantages.

The corporation is considered a separate entity, and as such, is subject to its own set of regulations and laws. A Unanimous Shareholder Agreement governs the relationship.

Creating Your Agreement

Once you’ve determined your business structure, it’s time to create your agreement. This will help ensure that you and your partner are on the same page in terms of expectations and responsibilities.

Your agreement should include details such as:

  • The percentage of ownership that each partner has
  • How profits and losses will be shared
  • The purpose of the partnership
  • What rights and responsibilities each partner has
  • Any restrictions placed on the partners, such as limits on selling shares or assigning interests in
  • How to dissolve the partnership
  • How the business should be appraised, how many appraisals are needed and who will cover the cost of the appraisal(s)

This leads us to the next point, which is, “What happens when you want to end a partnership?”

Ending Partnerships in Ontario

No matter how well-crafted your partnership agreement is, there may come a time when you and your partner no longer want to continue working together.

In such cases, it’s important to have a plan in place for ending the agreement. This should include steps such as notifying any creditors that the partnership has been dissolved, informing any third-party service providers, and filing the appropriate paperwork with the relevant government agencies.

What if the end of your partnership is less of an agreeable end, and more of a business divorce? In such cases, it’s best to consult with a lawyer to ensure that you are following all of the necessary steps for the dissolution.

Of course, having a strong contract in place can help minimize the conflict involved, since all parties will already have a clear picture of their rights and responsibilities.

Handling Disputes in Your Partnership

When you begin your partnership, you are in a “honeymoon phase” where everything is smooth sailing. However, disagreements may arise over the course of your business relationship, whether it be about profits, decision-making power or other matters.

It’s important to have a plan for addressing disputes that come up. Your agreement should include procedures for resolving conflicts, such as mediation, arbitration or appointing an independent third-party to act as a mediator.

By creating a clear and comprehensive partnership agreement, you can help ensure that your business relationship runs smoothly and reduce the possibility of conflict in the future.

When There Is No Partnership Agreement

It is incredibly difficult to prove the terms of a partnership without a written agreement. Even if you and your partner have verbal arrangements, these are difficult to enforce in court and can lead to costly disputes.

In the absence of a contract, you find yourself in a situation of cobbling together emails, text messages, and other evidence to prove the terms of your relationship. This is a difficult and time-consuming process and can result in costly legal battles.

Therefore, it’s important to create a partnership agreement right from the start. This will ensure that you and your partner have an understanding of each other’s roles within the business, and will help you avoid costly disputes in the future.

It does not matter if your business partner is your sibling, parent, best friend, etc. A clear written contract is necessary.

When Your Business Partner Is Your Life Partner

When spouses are also business partners, this adds another layer of complexity to the relationship. Usually, both relationships end simultaneously, creating an incredibly emotionally charged situation.

Having independent legal counsel to handle your business interests is paramount in such cases. It’s important to ensure that all parties understand their rights and responsibilities and that both partners’ needs are adequately addressed.

Additionally, Beeskma Law is happy to now provide the following Family Law services:

  • uncontested divorces
  • cohabitation agreements
  • prenuptial agreements
Beeksma Lawyers

Beeksma Law – Your Partner for Successful Business Relationships

Creating and managing a successful business relationship takes time, energy, and dedication. It’s important to have the right tools in place. That way, you can focus on what matters most: growing your business. At Beeksma Law, we understand how important it is to have an effective partnership agreement in place.

We specialize in helping business owners create, review and negotiate partnership agreements that work for both partners. Our experienced attorneys will help you navigate the legal complexities of your business relationship and protect your interests. Contact us today to learn more about how we can help you create a strong foundation for success.