Limited partners must not participate in the management of the partnership or they risk losing their limited liability. For tax purposes a partnership is not recognized as a distinct entity. Rather, the profits and losses of the partnership flow through, on a proportionate basis, to the partners who must pay tax on these amounts in their personal tax returns. A corporation is a legal entity distinct from its shareholders. Shareholders of the corporation do not own the business or assets of the corporation but are also not personally responsible for the liabilities of the corporation.
Corporations offer limited liability, ease of transfer of assets, and perpetual existence.
Since a corporation is a distinct legal entity it must pay tax on its income. By far, the corporation is the most common business structure. A corporation may be created under either federal or provincial jurisdiction. Generally, if the business of the corporation will be conducted in only one province the company is incorporated provincially. Companies which wish to carry on a business regulated federally must be incorporated under federal laws and sometimes under industry specific legislation, such as banks.