Learn About the Different Legal Forms of Enterprises

In Québec, enterprises can operate under a variety of legal forms. Below is a brief description of the main enterprise legal forms.

This is a sole proprietorship operated by a single person, often referred to as a “self-employed worker”.

Such an enterprise does not have a legal existence separate from its owner.

In short, when an natural person runs a sole proprietorship, he or she is often said to be “self-employed”. Moreover, since this person is the sole owner of the business, he or she is the one who reaps all the profits and suffers all the losses, if any.

A business corporation (also called a “corporation” or “legal person”) is a separate legal entity. As such, it has its own rights and obligations. In Québec, business corporations are constituted 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.

Characteristics of a business corporation:

• It has an existence separate from that of its shareholders.
• It owns property in its own name.
• It has rights and assumes obligations and responsibilities.
• It signs contracts through its directors.
• It can sue or be sued in the same way as a natural person.

A general partnership is a group of persons, called “partners”, who agree, in a spirit of cooperation, 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 to share any resulting pecuniary profits or losses.

Such a partnership is created through a partnership contract and must be designated under a name common to the partners. They are jointly and severally liable for certain debts and obligations of the entreprise, regardless of their respective shares in the company.

These may include professional offices (lawyers, notaries, dentists, etc.).

A general partnership has a registered office (principal place of business), its own name and can sue and be sued.

A limited partnership consists of one or more general partners and one or more limited partners who are required to contribute to the partnership's common fund. It is created by means of a partnership contract and must be designated under a name common to the partners.

General partners contribute their work, experience and expertise. They are the only persons authorized to administer and represent the company. They are jointly and severally liable for the company's debts.

The capital contribution to the limited partnership is made by the limited partners. Limited partners contribute money or property to the company, and their liability for the company's debts is limited to their contribution to the company.

A general partnership has a head office (principal place of business), its own name and can sue and be sued.

This is a company that is not a legal entity and has no legal personality, and whose partners act in their own name on behalf of all. Any unregistered Québec limited or general partnership is considered an undeclared partnership.

The contract establishing the joint venture may be written or verbal, or may result from facts that indicate an intention to partner.

A non-profit legal person is a group of people engaged in non-profit activities in the cultural, social, philanthropic, national, patriotic, religious, charitable, scientific, artistic, professional, athletic, sporting, educational or other fields.

Characteristics of a non-profit legal person:

• It has an existence separate from that of its members.
• It has its own name, domicile and property.
• It has rights and assumes obligations and responsibilities.
• It signs contracts through its directors.
• It can sue or be sued in the same way as an natural person.
• It has no share capital, and its members incur no liability in respect of it.

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 the publication of the declaration of co-ownership in the Land Register. Its purpose is to preserve the building, maintain and administer the common areas, safeguard the rights relating to the building or the co-ownership, and carry out all operations of common interest.

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 or the community.

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.

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. The member’s liability is limited to the value of the shares that they hold.

A trust that operates a commercial enterprise is a trust that carries on an organized economic activity 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 the 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.

A trust is established in favour of the beneficiary, who enjoys the benefits generated by the trust according to the terms of the constituting instrument.

For more information, click Trust that Operates a Commercial Operation.