Starting a business in British Columbia involves a series of strategic decisions, one of the most critical being the selection of an appropriate legal structure. The choice between conducting business as a sole proprietor, through the formation of a partnership, or by incorporating a company has far-reaching implications for liability, taxation, governance, and regulatory compliance. This article provides an overview of the primary business structures available in British Columbia—namely companies (also known as corporations), general partnerships, and limited partnerships—along with practical considerations and guidance on the formation, maintenance, and legal obligations associated with each structure. This article does not seek to comprehensively discuss all the structures available to business operators, but focuses on those structures intended for those seeking to operate a business with a view to making profit, as such community contribution companies, benefits companies, societies, and other business vehicles designed for businesses focused on societal change, rather than profit, have not been discussed. Additionally, while Limited Liability Partnerships are also a relatively common business structure in British Columbia, their use tends to be limited to professional services businesses such as lawyers and accountants, and as such they fall beyond the scope of this article.

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Preliminary Considerations Regarding Structuring a Business

The selection of the appropriate business structure for a given business should be guided by several key considerations.

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Liability

First and foremost is the issue of liability. Business owners must determine the extent to which they are willing to expose their personal assets to the risks and obligations of the business. In general partnerships, every partner is personally liable for the debts and obligations arising from the business’ operations, including all debts and obligations incurred by one’s partners even without a partner having knowledge or granting approval of those debts or obligations. In contrast, corporations and limited partnerships offer varying degrees of liability protection for the business owners’ (the company’s shareholders, or limited partnerships limited partners) personal assets.

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Taxation

Taxation is another critical consideration, and it is important that business operators to obtain tax and accounting advice before settling on the business structure through which they will operate their business. Partnerships are generally treated as “flow-through” entities for tax purposes, meaning that the partnership itself does not pay income tax. Instead, the income and losses of the partnership are allocated to the partners, who report them on their personal tax returns. By allocating partnership income and losses to the individual partners, the partners may be able to gain a tax benefit by setting off losses from other business ventures against partnership income, or by setting off partnership losses to reduce taxable income the partners may have received from other ventures. Companies, by contrast, are entities that are legally distinct from their shareholders. A company pays corporate income tax on its income, and shareholders are personally taxed again when they receive dividends from their company, there is no ability for the owners of a corporation to set off a corporation’s income or losses against their personal income or losses from other ventures or vice versa. However, companies may benefit their shareholders through other advantages, such as great ability to carry out tax planning and deferral, the ability to implement succession planning, the ability to split income, the availability of the small business tax deduction, and have the advantage of perpetual existence.

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Perpetual Existence

As independent legal entities companies will continue to exist in perpetuity despite the death or incapacitation of their owners, provided that the corporation complies with applicable laws and regulations and is not dissolved for non-compliance. This makes companies the best vehicle for conducting business if it is the intention of the owners to sell their business or pass it down to the next generation. While it is possible to affect the transfer of ownership of a partnership between generations or to other owners, it takes significantly more planning to ensure a partnership is properly maintained through such transactions.

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Administrative Costs and Expenses

Cost and administrative complexity are also important. Partnerships are generally less expensive and easier to maintain throughout their lifetimes, though the preparation of a comprehensive partnership agreement can be expensive. On the other hand, companies require more formalities to incorporate, and to ensure their ongoing compliance with applicable legislation. These formalities include the filing of incorporation documents with the BC Registrar of Companies, the preparation and maintenance of more substantial corporate records, and the filing of annual reports.

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Regardless of business structure, it is vital to the long-term success of any business that its constating documents and records be kept up to date ensure that there is clarity as to who owns and has decision making authority with respect to the business. Businesses that fail to maintain their records can be subject to fines, may be unilaterally dissolved by the Registrar, and may have trouble finding investors or buyers as these individuals are often cautious investing in businesses whose records do not clearly indicate who has owned and controlled the business throughout its existence.

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Companies

Incorporation of a Company

Incorporating a company under the British Columbia Business Corporations Act creates a separate legal entity distinct from its owners. This structure is ideal for businesses seeking limited liability for its owners, perpetual existence, and the ability to raise capital from investors or transfer the business to new owners.

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The incorporation process begins with reserving a corporate name through BC Registries and Online Services. The name must include a descriptive element (what the company does), a distinctive element (something unique to the company), and legal element such as “Limited”, “Incorporated,” or “Corporation”, or a related abbreviation such as “Ltd”, “Inc”, or “Corp”. A company name must not be substantially similar to, or be easily confused with, the name of an existing company. If it is the Registrar will not permit the name to be reserved or used. One may skip name reservation if they wish to incorporate a “numbered company” or a company with only a number as its name. Once the name is approved it will be reserved for a period of time, during which the incorporators must file an Incorporation Application, including an Incorporation Agreement and a Notice of Articles with the BC Registrar of Companies. Upon approval of those filings, the Registrar issues a Certificate of Incorporation that evidences the existence of the company.

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The Incorporation Application submitted by the incorporators must also appoint at least one director. Directors are responsible for the day to day oversight of the company’s operations. Duties of loyalty and good faith in favour of the company are imposed on directors, which means that directors are prohibited from acting in a manner that is adverse to the interests of the company and must take steps to ensure they govern the company in a reasonable and prudent manner. While directors’ have the power to make decisions on behalf of the company and the authority to bind the company to obligations, they also bear the burden of potential personal liability (their personal assets could be placed at risk) should they fail to adhere to their duties of loyal, good faith, and reasonable care. Certain laws also hold the directors of a company personally responsible for ensuring the company follows those laws, for example, directors are held personally responsible for a company’s failure to remit its taxes and may be help personally responsible for failing to pay employees wages. In British Columbia, the appointment of officers such as a company President, Secretary, CEO, CFO, or other position, is optional. However, like directors those who are appointed as officers are subject to duties of loyalty, good faith, and reasonable care to the company.

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Mandatory Corporate Records

Once incorporated companies must maintain a registered office and a records office in British Columbia. At the records office, the following documents must be kept:

1. Certificate of Incorporation (issued by the BC Registrar of Companies to confirm the existence of the company).
2. Notice of Articles (definitively confirm the directors and setting out the classes of shares the company is authorized to issue).
3. Articles (confirming the rules the company must follow in conducting its operations and confirming the rights and restrictions associated with each share class described by the Notice of Articles).
4. Central Securities Register (listing shareholders, share classes, and issuance dates).
5. Register of Directors (including names, addresses, and appointment dates);
6. Share certificates issued by the company.
7. All shareholder and director resolutions.
8. Copies of the company financial statements.
9. Copies of the company’s annual reports.

Certain other documents that are required to be kept at the records office may arise on a case by case basis but do not occur in all cases.

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These corporate records are the principal source determining who has ownership and control of the company. Business owners must therefore take care to ensure the records are prepared accurately at the time of incorporation, and to keep them up to date at all times during the life of the company. Failure to do so may result in disputes between shareholders, with third parties, or with regulatory authorities as to who is entitled to benefit from the ownership and control of the company, which disputes may require costly and time consuming litigation to resolve.

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Subject to certain exceptions companies incorporated in British Columbia must also maintain a “Transparency Register” listing all “significant individuals” having an interest in the company. The register must include the full legal name, date of birth, last known address, citizenship and residency status, the date the individual became or ceased to be significant, a description of how they qualify as a significant individual, and the steps taken to confirm the information. Access to the Transparency Register is restricted to directors and authorized government officials. There are significant fines and penalties that can be imposed on companies that fail to maintain a Transparency Register.

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Ownership of a Company

Ownership of a company is not as simple as owning some percentage of a company’s shares. The Notice of Articles and the Articles of a company must respectively set out the various classes of shares a company is authorized to issue to shareholders, and the rights and restrictions associated with each class of shares. Every company must have shares that are entitled to vote on matters related to the operations of the company, shares that are entitled to receive the profits of the company during its life, and shares that are entitled to the equity and assets upon liquidation of the company’s business, but the mix of rights attributed to each share class, and the number of available share classes, is at the company’s discretion.

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These principal rights, along with any additional rights or restrictions the incorporators of the company see fit to assign, may be combined and distributed amongst a company’s various share classes in whatever manner the incorporators deem fit. However, it is vital that the share classes described in the Notice of Articles and rights and restrictions assigned to each class by the Articles are internally consistent, and that the assigned rights and restrictions are set out in the Articles in a practical and coherent matter. Failure to ensure consistency between the Notice of Articles and the Articles, or to ensure the rights and restrictions assigned to each class of shares are set out in a practical and coherent manner, may result in confusion and dispute as to who validly owns the shares of the company and what rights each owner is entitled to with respect to the company. Every distribution or transfer of shares should be meticulously documented at the time the transaction occurs, to ensure that the agreed details of the transaction are recorded for reference should the shareholders or the directors of the company disagree as to the terms of transaction at a later date.

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Taxation of Companies

Companies are taxed as separate entities from their shareholders. Meaning they pay corporate income tax on their income, and shareholders are taxed personally when they receive dividends from the companies they own. However, there are mechanisms in under taxation legislation that attempt to minimize the impact of this double taxation, so that in effect the taxes paid by shareholders are roughly equal to the taxes that shareholders would have paid if they received the funds directly. It is vital that business owners retain an accountant to ensure that are able to minimize the excess tax paid when operating through a company.

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Shareholders’ Agreements

Incorporation and preparation of the records described above is generally all that is necessary to creating a company that is ready to conduct business. However, if the company will be owned by more than one person a Shareholders’ Agreement governing the relationship between each of the shareholders and the company is strongly recommended. The British Columbia Business Corporations Act offers little guidance or direction with respect to the resolution of disputes between shareholders or the appropriate governance of company operations. Therefore, a Shareholders’ Agreement is necessary to fill the gaps and enable disputes regarding the company to be resolved in an efficient manner. A Shareholders’ Agreement should address key issues such as who is entitled to sit on the board of directors for the company (and thereby have authority over the day to day operation of the company), the capital contributions required of each shareholder and how financing decisions will be made on a go forward basis, limits operational decision-making authority of the directors, the availability dispute resolution mechanisms, the procedures that must be followed if the shareholders want to sell their shares or have the company issue new shares to new or existing shareholders, as well as any other company specific matters or agreements that may arise between the shareholders.

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General Partnerships

Formation of General Partnerships

A general partnership involves two or more people carrying on business together with a view to profit. A general partnership can be formed without any formal registration or even any documentation. Under the British Columbia Partnership Act if two or more people carry on business together with a view to profit, they are deemed to have formed a partnership. Business operators must be wary of this deemed existence of a partnership, as the Partnership Act may, unknown to the partners, impose rights and obligations that do not align with their intentions. To avoid unwanted obligations and to ensure each partner receives the rights it was intended they receive, business operators carrying on business collectively should document the rights and obligations they are each entitled to in a partnership agreement.

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Notwithstanding the fact a general partnership can be formed without any documentation, if the business operates under a name other than the legal names of the partners the name must be registered with the BC Registrar of Companies. Additionally, if a partnership seeks to operate in certain more heavily regulated industries (e.g. trading, manufacturing, or mining), there is an obligation to file a registration statement with the BC Registrar of Companies.

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To register a business name, the partners must first submit a Name Request through BC Registries and Online Services. The name must be distinctive and not misleading or confusingly similar to existing partnership or company names. Once the name is approved, the partnership can be registered by submitting the appropriate registration documents to the BC Registrar of Companies. Nothing further is required to form a general partnership, but best practice is to document the rights and obligations of the partners in a partnership agreement.

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General Partnership Agreements

Although not legally required for the formation of a general partnership, it is strongly recommended that the partners enter into a written partnership agreement. This agreement should address key issues such as the nature of the business, the capital contributions of each partner and how other financing decisions will be made, the allocation of profits and losses, the authority of each partner to bind the business, operational decision-making procedures, dispute resolution mechanisms, and procedures for admitting new partners or dissolving the partnership.

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Liability of Partners

In a general partnership, each partner is jointly and severally liable for the debts and obligations of the partnership’s business. This means that a creditor may pursue any one partner for the full amount of a debt, regardless of which partner approved it and whether the other partners even had knowledge of the debt. This exposure to personal liability, and the lack of control over the debts and obligations for which a partner may become responsible, is one of the primary drawbacks of the general partnership structure.

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Taxation of Partnerships

General partnerships are generally treated as “flow-through” entities for tax purposes, meaning that the partnership itself does not pay income tax. Instead, income and losses are allocated to the partners, who report them on their personal tax returns. By allocating partnership income and losses to the individual partners, the partners may be able to gain a tax benefit by setting off losses from other business ventures against partnership income, or by setting off partnership losses to reduce taxable income the partners may have received from other ventures.

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A Note on Sole Proprietorships

Sole proprietorships are, in effect, general partnerships with only one partner. Like general partnerships, the proprietor in a sole proprietorship is personally liable for the debts and obligations arising from the business of the sole proprietorship. There is no documentation required to form a sole proprietorship, provided that if the business is conducted under a name that is not the legal name of the proprietor, then that business name must be reserved and registered with the BC Registrar of Companies, and a registration statement is required to be filed if the proprietorship is going to conduct business in certain heavily regulated industries. The conduct of any substantive business as a sole proprietor is not typically advantageous, so this article will not discuss sole proprietorships in any greater detail.

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Limited Partnerships

Structure and Formation of Limited Partnerships

A limited partnership is a business structure that includes at least one general partner and one or more limited partners. The general partner manages the business on behalf of the limited partnership and assumes unlimited liability for the debts and obligations of the business, while the limited partners contribute capital to the business and enjoy liability protection for their personal that’s that have not been contributed to the limited partnership, provided they do not participate in the management of the business.

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To form a limited partnership, the general partners must first reserve a business name through BC Registries and Online Services. The name must include the words “Limited Partnership” or the abbreviation “LP.” Once the name is approved, the general partners must file a certificate with the BC Registrar of Companies confirming the existence of the limited partnership and disclosing certain information about the limited partnership. The limited partners are not afforded liability protection until the certificate is filed and approved by the Registrar.

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Limited Partnership Agreements and Partnership Records

Limited partnerships must also have a written partnership agreement. The agreement should address the roles and responsibilities of each partner, the amount and form of capital contributions, the allocation of profits and losses, limits on the scope of the general partner’s decision-making authority, and the procedures for admitting new partners or dissolving the partnership, among other partnership specific details. At the limited partnership’s records office, the following records must be maintained: a copy of the limited partnership agreement and any amendments to same, a copy of the filed certificate and any amendments to it, and a register of limited partners. This register must include the full name and address of each limited partner, the amount and type of their contribution, and the date of their admission or withdrawal.

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Liability in Limited Partnerships

Limited partners are liable only to the extent of their capital contributions to the limited partnership, unless they take part in the control and management of the business. If a limited partner participates in management, they may lose their limited liability status and be treated as a general partner. Thus, it is often the case that the general partner in a limited partnership is a company that is controlled by the individuals who also control the limited partners (themselves usually companies as well) in the limited partnership. With this structure, the general partner’s decisions will be guided by individuals each of whom seek to act in the best interest of a limited partner, but by acting through the corporate general partner these individuals ensure that no limited partner is perceived taking over the management of the business.

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Taxation of Limited Partnerships

Like general partnerships, limited partnerships are not taxed as entities, income and losses passed through to the partners, who report it individually and the income and losses can be comingled with each partners income or losses from other business ventures to create tax benefits.

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Operational Considerations

After business operators have settled the business structure through which they intend to operate, and formation of the business structure has been completed they must turn their mind to the regulatory requirements imposed on operating businesses.

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Employment Matters

Regardless of business structure, businesses that employ employees must comply with the Employment Standards Act of BC, which sets out minimum standards for wages, hours of work, overtime pay, statutory holidays, vacation entitlements, and termination notice or pay in lieu, among other obligations intended to protect and benefit employees. Legislation and common law in British Columbia are very favourable to employees and create risk of significant liability for employers if they are found to be in contravention of the law in this area. Implementing, adhering to, and regularly reviewing and updating properly drafted employment agreements and company policies is the best way for a company to mitigate the risk of liability with respect to its employees.

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Human Rights Matters

In addition to employment standards, businesses must comply with the British Columbia Human Rights Code. This legislation prohibits discrimination in employment and the provision of services on the basis of protected characteristics such as race, gender, disability, age, religion, and sexual orientation. Under the Human Rights Code Employers have a duty to accommodate employees with disabilities to the point of undue hardship, which may include modifying work duties, schedules, or physical workspaces. Being so closely comingled with employment legislation, the best way for a company to minimize its risk of liability under human rights legislation is all implementing, adhering to, and regularly reviewing and updating its employment agreements and company policies.

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Occupational Health and Safety Standards

The law also imposes workplace safety standards that governed by WorkSafeBC under the Workers Compensation Act and the related Occupational Health and Safety Regulation. All employers with one or more workers must register with WorkSafeBC and pay insurance premiums. Employers are responsible for ensuring a safe and healthy work environment, which includes conducting risk assessments, implementing safety protocols, providing training and supervision, and reporting workplace injuries and incidents. A mandatory aspect of WorkSafe compliance is the implementation of a Bullying and Harassment policy, which often takes the form of a Workplace Conduct Policy. Employers should review the Workers Compensation Act , the Occupational Health and Safety Regulation, and WorkSafeBC’s related policies and bulletins to determine what aspects of these regulations apply to their business, and take steps to implement policies and procedures addressing each relevant aspect.

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Privacy Obligations

Privacy obligations are also critical, particularly for businesses that collect, use, or disclosure personal information about customers, employees, or clients. The Personal Information Protection Act (PIPA) requires businesses operating in British Columbia to obtain informed consent before collecting, using, or disclosing any individuals’ personal information, to use the information only for the purposes for which it was collected, and to implement reasonable security measures to protect it. Businesses must also have a privacy policy and a designated privacy officer, and they must respond to access and correction requests from individuals whose information they hold. It is strongly recommended that business owners take time to understand what constitutes “personal information” under PIPA and audit their business operations to determine how such information is collected, used, or disclosed. Only once this is understood can a business implement effective policies and security measures for managing the collection, use, and disclosure of that information.

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Taxation Authorities

Finally, most businesses must also register with appropriate taxation authorities, including the Canada Revenue Agency and the Ministry of Finance, and comply with tax remittance rules regarding the remittance of PST, GST, income tax, and other taxation requirements. Every business owner should retain a reliable accountant to assist them in effectively managing their tax obligations.

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The above considerations are by no means a comprehensive list, as businesses will bear industry, locational, and other business specific legal regulation and liability risks related to their operations. The above summary represents only a cursory review of some common examples of regulation that all businesses must investigate, understand, and comply with throughout the course of their operations.

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Conclusions

The process of structuring a business in British Columbia and implementing policies and procedures that govern its operations is not merely legal formality—these are strategic decision that shapes the business’s risk profile, tax obligations, governance structure, and long-term potential.

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General partnerships offer simplicity and flexibility but expose partners to unlimited personal liability. Limited partnerships provide a mechanism for passive investment with liability protection for limited partners, but they require careful adherence to statutory formalities to preserve that protection. Companies, while more complex and administratively demanding, offer the most robust legal framework. They provide limited liability to shareholders, perpetual existence, and access to tax planning and tax deferral strategies, succession planning methods, income splitting potential, as well as easier access to capital from third party investors. However, they also require strict compliance with corporate governance rules, record-keeping obligations, and ownership transparency requirements.

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Regardless of the structure chosen, all businesses must comply with a range of legal obligations under employment, privacy, human rights, occupational health and safety, and legislation, and may face additional regulatory burdens on an industry, locational or other basis. These obligations are not optional; policies and procedures for compliance must be integrated into the day-to-day operations of the business from the outset of its operations, and should be regularly reviewed and updated to ensure compliance is maintained as the business the regulatory environment within which it operates evolves.

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Entrepreneurs are strongly encouraged to seek legal and accounting advice when selecting and establishing a business structure and commencing business operations. Professional guidance can help ensure that the chosen structure aligns with the business’s goals, minimizes legal and financial risk, ensure regulatory compliance and sets the foundation for sustainable growth. With the right structure in place and a clear understanding of the associated responsibilities, business owners in British Columbia can move forward with confidence, knowing they have built their enterprise on a solid legal and operational foundation.

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The foregoing is not intended to be legal advice and should not be construed as such, it is merely legal information. Every business is unique and business operators should seek legal and accounting advice specific to their circumstances.

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