Limited Liability Partnerships (LLPs) in Ontario

A limited liability partnership, usually called an “LLP,” is a specific partnership structure recognized under Ontario’s Partnerships Act that gives individual partners a degree of protection from liability for the negligence of their co-partners. It is still fundamentally a partnership — the partners jointly carry on the business together — but with a modified liability rule layered on top of the ordinary partnership framework.

It is worth being direct about something that often causes confusion: an Ontario LLP is not the broadly available, general-purpose liability shield that an LLC — a limited liability company — is in many U.S. states. Ontario has no direct equivalent to the American LLC, and an LLP here is a considerably narrower tool, available only to specific regulated professions rather than to businesses generally.

This distinction matters because business owners researching liability protection sometimes assume an LLP is simply the Canadian version of an LLC, and are surprised to learn their business is not eligible to use the structure at all.

The confusion is understandable given how similar the two acronyms look, and how freely the term “LLP” is used in American business media without the Ontario-specific restriction being spelled out. Anyone researching liability structures for an Ontario business is generally better served starting from what Ontario’s own Partnerships Act actually permits, rather than from assumptions carried over from a different jurisdiction’s rules.

Under Ontario’s Partnerships Act, the limited liability partnership structure is restricted to specific regulated professions practising through their governing bodies. The two most prominent examples are lawyers, who can practise through an LLP under rules set by the Law Society of Ontario, and chartered professional accountants, who can do the same under the rules of their own governing body.

The underlying policy reason is that these professions are often required, by their own governing rules, to practise in partnership form rather than through a corporation, which historically left individual partners fully exposed to a co-partner’s professional negligence. The LLP structure was introduced specifically to address that exposure for professionals operating under this kind of mandatory partnership model.

A general business — a retail operation, a consulting firm outside a regulated profession, a trades or construction business — is generally not eligible to register as an LLP in Ontario, regardless of how the owners would prefer to structure their liability.

Other regulated professions governed by their own bodies may have similar arrangements permitting a comparable structure, and the specific rules can evolve over time, so a firm considering this route should confirm current eligibility and requirements directly with its own governing body rather than relying on a general list.

For the professions that can use it, an LLP generally shields an individual partner from personal liability for professional negligence committed by another partner, provided they were not personally involved in, or directly supervising, the work that gave rise to the claim. In an ordinary general partnership, by contrast, a partner can generally be held personally liable for a co-partner’s negligence even without any direct involvement, simply by virtue of being a partner in the same firm.

Each partner in an LLP generally remains fully, personally liable for their own professional negligence and misconduct — the structure does not let a partner escape responsibility for their own work. What it changes is exposure to someone else’s mistake, which is precisely the risk that made the traditional general partnership model particularly uncomfortable for large professional firms with many partners who may never personally interact with a given client file.

This is often why the structure becomes especially relevant as a professional firm grows — a small firm with two or three partners who personally know every file may feel this risk less acutely than a large firm with dozens of partners spread across different offices and practice areas, where one partner may have no realistic way of knowing what another is doing on a given matter.

This distinction — protection from a co-partner’s negligence, but not from your own, and not from the firm’s general business obligations — is the core feature that makes an LLP meaningfully different from both an ordinary general partnership and a corporation.

It is important not to overstate what an LLP shields a partner from. The protection is generally targeted at professional negligence claims arising from another partner’s work — it does not generally extend to the firm’s ordinary business debts, such as a commercial lease, a bank loan, or amounts owed to suppliers, where partners can still face personal exposure depending on how the obligation was structured and whether they personally guaranteed it.

It also does not protect a partner from liability for their own negligence or misconduct, and it does not necessarily protect a partner from liability connected to work they personally supervised, even if they didn’t perform it directly. Firms operating as an LLP typically maintain significant professional liability insurance precisely because the structure addresses one specific category of risk, not every risk the business faces.

Businesses weighing liability protection more broadly, outside a regulated profession, are generally better served looking at a corporation, which provides a more comprehensive separation between the business’s debts and the owners’ personal assets. Our comparison of partnerships and corporations in Ontario covers that broader liability difference.

A firm eligible to use the structure generally needs to register as a limited liability partnership, typically involving both the applicable Ontario business registry and the requirements of its own governing professional body — for example, specific rules set by the Law Society of Ontario for law firms. Ongoing compliance generally includes maintaining adequate professional liability insurance, since the insurance requirement is often closely tied to why the liability protection is available in the first place.

Firms considering this structure typically work with their governing body’s specific requirements directly, since the rules can differ between professions and are generally set by the regulator rather than by general corporate or partnership legislation alone.

It is also common for an LLP’s name to be required to include a designation signalling its status, such as “LLP,” so that clients and other third parties dealing with the firm are put on notice of the structure they are contracting with. This kind of disclosure requirement is generally consistent with the broader idea that the public should be able to tell, from the firm’s name alone, what kind of entity they are dealing with.

Because the LLP structure is restricted to specific regulated professions, most Ontario businesses looking for liability protection use one of two alternatives instead: a limited partnership, which pairs a general partner who retains full liability with one or more limited partners whose liability is generally capped at their investment provided they stay out of management, or, far more commonly, incorporation. Our guide to general versus limited partnerships in Ontario explains how that structure works.

A corporation is generally the more straightforward route for a typical business seeking broad liability protection, since it is available to virtually any business regardless of industry, and it generally shields shareholders from personal liability for the corporation’s debts in a way the LLP structure, with its narrower focus, does not attempt to replicate. Our guide to converting a partnership to a corporation in Ontario covers how that transition generally works, and the Partnerships hub covers the partnership structures available more broadly.