CANADA Law and Practice Contributed by: Rachel V Hutton, Michael L Dyck, Mario Paura and Miguel Manzano, Stikeman Elliott LLP
offender to bring about compliance, and may pursue injunctions and court orders.
unlimited joint and several personal liability for the partnership’s obligations; and • in a limited partnership, partners are divided into “general” and “limited” partners, with the latter’s liability being limited to the amount of their capital contributions, on the condition that they do not participate in the manage - ment of the business of the partnership. A significant advantage of investment via a part - nership is the tax treatment – although income and losses are calculated at the partnership lev - el, they are taxed and deducted at the partner level. Co-Ownerships Co-ownerships, like partnerships, are not sepa - rate legal entities but constitute a contractual relationship between landowners. Income and losses pass through to the co-owners, who may claim tax deductions separately from the other co-owners. Accordingly, co-ownership agree - ments must be drafted to avoid the possibility of the relationship being construed as one of partnership (where, for example, each partner can bind all the other partners) rather than co- ownership. Trusts Trusts are also not separate legal entities and constitute a relationship whereby a person holds property as a trustee for the benefit of others. Both trustees and beneficiaries can be person - ally liable in connection with the trust property, subject to indemnification. Additionally, publicly traded real estate investment trusts have certain legislative protections in this regard. Income may be taxed at the trust or beneficiary level. 5.3 REITs Real estate investment trusts (REITs) are avail - able to be used in Canada, and may be publicly
5. Investment Vehicles 5.1 Types of Entities Available to Investors to Hold Real Estate Assets Legal persons (corporations and natural per - sons) may hold real property in Canada by way of direct ownership by an individual or through ownership of shares in a corporation that owns real estate. Relationships may also be estab - lished for the ownership of land, such as co- ownerships, partnerships and trusts, largely based on tax consequences, liability concerns and business considerations. Corporations, partnerships, co-ownerships and trusts are the most popular real estate investment vehicles in Canada. 5.2 Main Features and Tax Implications of the Constitution of Each Type of Entity Corporations Corporations are legal entities distinct from their shareholders. While corporations provide the benefit of limited liability for shareholders, the income, losses, gains and capital cost allow - ances of the corporation are taxed or deducted at the corporate level, followed by the taxation of dividends in the hands of the shareholders. Partnerships By contrast, a partnership is not a distinct legal entity, and constitutes a legal relationship among its partners and is governed by common law and/or statute. Under Canadian law, there are two principal types of partnership “general” and “limited” : • in a general partnership, all partners can participate in management and are subject to
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