When professionals in Ontario such as lawyers, charteredprofessional accountants, or architects come together to practise, one of themost effective structures available to them is the Limited LiabilityPartnership (LLP). Unlike a traditional partnership, where each partner couldbe held personally liable for the mistakes of others, the LLP offers animportant safeguard: protection from liability arising from another partner’snegligence or misconduct. Each partner, however, remains fully responsible fortheir own professional actions and for the contractual obligations of thepartnership. This structure makes LLPs especially appealing to those inregulated professions, as it allows individuals to collaborate whilemaintaining protection against liability for colleagues’ mistakes.    

How an LLP Works

An LLP functions much like a regular partnership: thepartners share management duties, pool resources, and divide profits accordingto their agreement. The crucial difference lies in liability. If one partnercommits professional negligence, the others are not personally exposed tolawsuits stemming from that act.

To illustrate, consider two accountants Alex andWenger, who form an LLP. If Alex makes an error in a client’s tax return thatleads to a lawsuit, Wenger is not personally liable for that mistake. Hispersonal assets remain protected, though the partnership itself may still bearresponsibility. This structure creates a balance between collective operationand individual protection.

Forming an LLP in Ontario

Creating an LLP in Ontario involves two main steps.First, approval is required from the relevant regulatory authority such as theLaw Society of Ontario for lawyers or the Chartered Professional Accountants ofOntario for accountants. Once approval is secured, the LLP must be registeredunder the Ontario Partnerships Act. The partnership’s name must clearly include“LLP” so the public is aware of its limited liability status.

Although LLPs are not separate taxable entities,partners report income and expenses through their own personal tax returns.This makes LLPs simpler from a tax administration standpoint compared tocorporations, though it may not provide the same tax planning opportunities.

LLPs vs. Professional Corporations

Professionals in Ontario often weigh the choicebetween forming a Limited Liability Partnership (LLP) or a professionalcorporation when structuring their practice. A professional corporationgenerally provides broader liability protection, shielding owners fromfinancial obligations such as debts or leases, though it does not protectagainst personal professional negligence. By contrast, LLPs are relativelystraightforward to establish and manage, with income and expenses flowingdirectly to partners’ personal tax returns, but they provide a narrower form ofliability protection. The key safeguard of an LLP is that one partner is notpersonally liable for another partner’s professional negligence, although eachremains responsible for their own work and for the contractual obligations ofthe partnership.

The LLP is particularly suited to professionals whowant to combine forces while retaining independence in their practices. Itallows collaboration, resource-sharing, and joint branding without exposingevery partner to the risks of another’s mistakes.

At Kormans LLP, we are ourselves an LLP giving usfirst-hand experience with the advantages and responsibilities that come withthis structure. We advise clients daily on whether an LLP is the right fit fortheir professional practice and assist with the registration and complianceprocess. For more information about this topic, please feel free to contact oneof our lawyers! Reach out to us at (905) 270-6660 or by email at info@kormans.ca.

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