Can a joint venture in Ontario be structured without creating a partnership relationship?
Yes, but it takes careful, deliberate structuring, not just calling the arrangement a joint venture instead of a partnership. Because Ontario's Partnerships Act defines a partnership by the substance of the relationship — carrying on business in common with a view to profit — a court will look past whatever label the parties chose and examine how the arrangement actually operates when deciding whether it's really a partnership.
To reduce the risk of being treated as a partnership, a joint venture agreement can limit the arrangement to a specific, defined project rather than an ongoing shared business, structure payments as cost-sharing or fees rather than a share of joint profits, keep each party's decision-making separate and limited to their own contribution rather than jointly managing the whole venture, and include an express statement that the parties don't intend to create a partnership. None of these steps is a guarantee on its own — courts weigh the actual relationship, not just the contract wording — so the agreement needs to be drafted carefully and the parties need to actually operate consistently with it. If avoiding partnership liability is the goal, get a lawyer to structure this properly from the outset.
Key takeaways
- A joint venture can be structured to reduce the risk of being treated as a partnership
- Courts look at the substance of the relationship, not just the label or wording used
- Limiting scope, using cost-sharing rather than profit-sharing, helps avoid partnership status
- The parties must actually operate consistently with the intended structure, not just on paper