When professionals in Ontario such as lawyers, chartered professional accountants, or architects come together to practise, one of the most effective structures available to them is the Limited Liability Partnership (LLP). Unlike a traditional partnership, where each partner could be held personally liable for the mistakes of others, the LLP offers an important safeguard: protection from liability arising from another partner’s negligence or misconduct. Each partner, however, remains fully responsible for their own professional actions and for the contractual obligations of the partnership. This structure makes LLPs especially appealing to those in regulated professions, as it allows individuals to collaborate while maintaining protection against liability for colleagues’ mistakes.    

How an LLP Works

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

To illustrate, consider two accountants Alex and Wenger, who form an LLP. If Alex makes an error in a client’s tax return that leads to a lawsuit, Wenger is not personally liable for that mistake. His personal assets remain protected, though the partnership itself may still be a responsibility. This structure creates a balance between collective operation and 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 the Law Society of Ontario for lawyers or the Chartered Professional Accountants of Ontario for accountants. Once approval is secured, the LLP must be registered under 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 to corporations, though it may not provide the same tax planning opportunities.

LLPs vs. Professional Corporations

Professionals in Ontario often weigh the choice between forming a Limited Liability Partnership (LLP) or a professional corporation when structuring their practice. A professional corporation generally provides broader liability protection, shielding owners from financial obligations such as debts or leases, though it does not protect against personal professional negligence. By contrast, LLPs are relatively straightforward to establish and manage, with income and expenses flowing directly to partners’ personal tax returns, but they provide a narrower form of liability protection. The key safeguard of an LLP is that one partner is not personally liable for another partner’s professional negligence, although each remains responsible for their own work and for the contractual obligations of the partnership.

The LLP is particularly suited to professionals who want to combine forces while retaining independence in their practices. It allows collaboration, resource-sharing, and joint branding without exposing every partner to the risks of another’s mistakes.

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

‍