When it comes to launching a private investment fund, one structure stands out: the Limited Partnership (LP) with a General Partner (GP). It’s flexible, investor-friendly, and — when done right — highly tax efficient.
At Rabideau Law, we help clients build these structures from the ground up to raise capital, protect the general partner, and stay compliant with Canadian tax and securities law.
What Is an LP/GP Structure?
A Limited Partnership consists of two types of parties:
- General Partner (GP): Manages the day-to-day operations of the fund and assumes liability.
- Limited Partners (LPs): Passive investors who provide capital but do not participate in management.
Their liability is limited to their investment.
The GP is often set up as a corporation to shield personal liability — something we strongly recommend and assist with at Rabideau Law.
How It Works (Simplified Flow):
- LPs contribute capital
- GP deploys the capital into selected investments (e.g., real estate, startups, private companies)
- Profits (or losses) flow back through the LP, with distributions typically favoring the LPs until a preferred return is achieved
This setup allows for:
- Tiered distributions
- Management fees
- Carried interest (performance-based profit for the GP)
Why Investors Prefer It
- Limited liability: LPs are protected
- Tax efficiency: Pass-through entity, no double taxation
- Flexibility: Tailored terms in the Limited Partnership Agreement
- Credibility: Professional investors recognize and respect this structure
Why the GP Matters
The GP plays a critical legal and operational role. It must:
- Be properly formed (often as a corporation)
- Be indemnified in the Limited Partnership Agreement
- Have clearly defined rights and duties
Rabideau Law regularly drafts LP Agreements that reflect your deal terms while ensuring the GP is protected.
Common Use Cases for LP/GP Structures
- Private equity funds
- Real estate syndications
- Venture capital pools
- Family office funds
- Joint ventures with third-party investors
Ready to Start? We’re Your Legal Partner.
Whether you’re launching your first fund or expanding an existing one, Rabideau Law provides:
- GP/LP entity formation
- Limited Partnership Agreements
- CRA registration
- Ongoing legal guidance
Book your strategy call today. Build it right, from the ground up.
