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Canadian Limited Partnership - My Proposed Setup for some degree of Privacy: feedback welcome.

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kranj99

New member
Hello all - I've mentioned on a few occasions that I manage a Canadian LP (in Ontario) and now I am going to establishing a new LP for another investment vehicle. Just wanted to capture some feedback on the approach I'm planning on setting up this new LP.

I recently posted on here an enquiry on setting up a BV in the Netherlands - but as that deal did not conclude, and so I'm re-visiting a Canadian LP set up for a different project now.

Just some background info before getting down to the details: I do hold dual Citizenship with Canada and pre-covid I used to travel regularly back and forth between Canada and the EU. Now that borders are re-opening again, I plan to get back out there in the next month or two. I am NOT Canadian tax resident and have not been one for 20+ years now.

So what I want: a new LP with some degree of Privacy and more importantly low reporting requirements.

So this is what I'm thinking of doing:

1. Set up a foreign LLC (probably just a New Mexico LLC to keep costs/reporting low, but this can be offshore) - the key here is that it is a LLC (i.e. pass-through entity) and not an Incorporated company like Ltd, Inc. etc.

- I will NOT get any EIN for this US LLC as it will never transact in anything, nor ever get a bank account or anything. It is just for limited liability purposes and nothing else. I am not too sure if I truly will need to submit IRS form 5472 for this LLC given that it will essentially be dormant. Not sure on the legalities on this though - if not I could just go Offshore I guess as I don't need banking facilities for the LLC. The key again here is that I'm looking to set up a LLC and not Ltd/Inc.

2. Why LLC and not an Incorporated Entity? So if I want a foreign registered (incorporated) company to serve as a general partner in an Ontario Limited Partnership, I would need to declare it as an EPC (extra-provincial corporation) and on top I would need to have an "Agent of Service". Setting up an EPC is $330 and Agent of Service costs are variable from as low as a couple hundred per year all the way upwards of $1000+. On top of this I'd need of file Initial Returns/Annual Returns and other documentation/administrative hassles. It's the reporting bit that annoys me most of all!

- Hence the foreign LLC: Ontario does not recognize foreign LLC's as companies. But it does recognize them as pass-through entities. So in order for a foreign LLC to serve as General Partner, you can register it in Ontario as an Extra-Provincial LLC (Form # 6 with the Ministry). In this case, as a pass-through entity, Foreign LLC's do not need any Agent of Service, nor any local Ontario place of address. Once you submit the form, you will get a BIN (Business Identification Number)
- Form # 6 is only $80 CAD with the Foreign LLC being valid for 5 years before needing to be renewed.
- Just to Caveat this process though: on this Form # 6 you need to declare a name as someone "Authorized to Sign" on behalf of this foreign LLC. I would suspect this would then be visible on the public record - but only as an authorized signatory, not as UBO or anything equivalent. The form does not ask for an address, just a name only.

3. Once you have the BIN Number, you can then proceed in setting up your Limited Partnership (in Ontario you need to fill out Form #3). In the General Partner field, you will put down your foreign LLC/foreign address with the Ontario BIN Number

4. For banking purposes you may need to declare " Power of Attorney" for yourself (Ontario Form #4) and if so you will need to use your real name and this will go on the public record. But only as the "Signatory with Power of Attorney" not as General Partner Limited Partner or anything more 'UBO' centric. Again on the public record it only will list your name, but not address or anything.

- Otherwise as mentioned above, I believe a decent Limited Partnership Agreement would suffice for the Bank Account Opening, but I don't want to claim this with 100% certainty!

While this set up is not 100% privacy proof (i.e your name as Power of Attorney) it seems generally a workable solution on the whole - at least from a low-reporting perspective,. But I'm not sure if there are some pitfalls here that I need to look out for and so any advice/inputs would be appreciated. Especially on not getting an EIN/not-submitting IRS 5472 etc.

At the same time if my approach is reasonable, I hope it helps others with a similar interest in setting up a Canadian LP !

Thanks in advance....
 

kranj99

New member
The mid-term plan of this LP is participating in some industrial real estate in Canada (mining sector) but none of the limited partners (investors) are Canadian residents. That said the LP is a quick & easy set up - hence why its one that I'm considering
 

kranj99

New member
I guess because he probably thinks that by using an LLC without EIN and without bank account will remove the need for him to submit form 5472
Point taken on this - and the more I'm looking into it, it seems that I need the EIN/5472 even if I don't transact. That said, I'm now thinking I might be better off with an offshore LLC given that I don't need to transact
 

kranj99

New member
Why can't you just use a US LLC for that, if you have to set one up anyway?
Given that the nature of the business is related to Canadian mining, a Canadian LP makes it a more suitable vehicle than a US LLC. The LLC is just for GP Purposes but not for transactions
 
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