Legal Forms of Enterprises
In Québec, enterprises can carry on a business in a number of legal forms. Summary descriptions of the principal legal forms are presented below.
Sole proprietorship
A sole proprietorship is an enterprise that is owned and operated by one person only. This person is often called a "self-employed person."
Such an enterprise has no legal existence, juridical personality or patrimony separate from that of its owner.
To summarize, a natural person who operates a sole proprietorship is often said to “work for him or herself.” Moreover, since the person is the sole proprietor of the enterprise, all profits made and, where applicable, all losses incurred are that person's alone.
Business corporation (corporation)
A business corporation (also called a "corporation" or "legal person") is a separate legal entity, and, accordingly, has its own specific rights and obligations. In Québec, business corporations are constituted, in particular, under the Business Corporations Act.
A business corporation operates an enterprise for the purpose of generating profit that will be distributed, as applicable, among its shareholders.
A business corporation:
- has an existence separate from that of its shareholders;
- owns property in its own name;
- acquires rights and assumes obligations and liabilities;
- signs contracts through its directors;
- may sue or be sued in the same way as a natural person.
General partnership (G.P.)
A general partnership is a group of persons, called "partners," who, in a spirit of cooperation, agree to carry on a common activity. The partners of a general partnership operate an enterprise, contribute to it by sharing property, knowledge or activities and share any resulting pecuniary profits or losses.
Such a partnership is created through a partnership agreement and must be designated by a single name for all the partners, who are solidarily liable for the enterprise’s obligations and certain of its debts, independently of the respective shares of each partner in the partnership.
A general partnership may consist, for example, of professional offices (lawyers, notaries, dentists, etc.).
A general partnership has a head office (principal establishment) and its own name. It may sue and be sued in a civil action.
Limited partnership (L.P.)
A limited partnership is a partnership consisting of one or more general partners and one or more limited partners. It is created through a partnership agreement and must be designated by a single name for all the partners.
General partners contribute, above all, their work, experience and expertise. They are the sole persons authorized to administer and represent the partnership. They are solidarily liable for the partnership’s debts.
Limited partners must furnish a contribution to the common stock of the partnership. They supply money or property to the partnership and their liability with regard to the debts of the partnership is up to the amount of their contribution to the latter.
A limited partnership has a head office (principal establishment) and its own name. It may sue and be sued in a civil action.
Joint venture (or undeclared partnership)
A joint venture is a partnership that is not a legal person and does not have a juridical personality, and whose partners act in their own name on behalf of all partners. All Québec general and limited partnerships that are not registered are considered joint ventures.
The contract by which a joint venture is established may be written or verbal or may arise from facts indicating the intention to form a joint venture.
Non-profit legal person
A non-profit legal person is a group of individuals who engages in non-profit activities that are cultural, social, philanthropic, national, patriotic, religious, charitable, scientific, artistic, professional, athletic, sporting, educational or other in nature, with no intention of generating profits for its members.
A non-profit legal person:
- has an existence separate from that of its members;
- has its own name, domicile and property;
- acquires rights and assumes obligations and liabilities;
- signs contracts through its directors;
- may sue or be sued in the same way as a natural person;
- does not have any share capital and its members are not liable in its regard.
Syndicate of co-ownership
A syndicate of co-ownership is a legal person governed by the Civil Code of Québec and made up of all the co-owners of a divided co-ownership. It is constituted by publication of a declaration of co-ownership in the land register Its purpose is to preserve the immovable, to maintain and manage the common portions, to protect the rights appurtenant to the immovable or to the co-ownership and to take all measures of common interest.
Association
A group of persons constituted for the purpose of pursuing a common goal other than making profits to be shared among its members. An association can make pecuniary profits, provided they are not shared among its members. The activities of an association aim to promote the study, the protection and the development of the economic, social or moral interests of its members.
Group of persons
A group of persons designates any aggregation, other than an association, which joins two or more persons who share a common interest (pecuniary or not). It can be a nominal partnership, a cost-sharing partnership, an economic interest group such as a consortium or joint venture, or other.
Cooperative
A cooperative is a legal person consisting of persons having common economic, social and cultural needs who unite to operate a business according to the rules of cooperative action in order to meet those needs.
It is a legal person separate from its members, whose liability is limited to the value of the shares that they hold.
Trust that operates a commercial enterprise
A trust that operates a commercial enterprise does so in order to turn a profit. Examples of such trusts include business trusts, investment trusts and real estate investment trusts.
The trustee administers the property of the trust in accordance with terms of the constituting instrument. This means that the trustee of a trust has essentially the same mission as the administrator of a business corporation.
The trust is established in favour of the beneficiary, who benefits from the profits generated by the trust in accordance with the terms of the constituting instrument.
For more information, click Trust that Operates a Commercial Operation.