What is the difference between shares in a corporation and units in a partnership or trust?

Shares and units are both forms of ownership interest in a business entity, but they arise in different legal structures with different legal, tax, and governance consequences.

Shares are issued by corporations — entities incorporated under statutes like the Ontario Business Corporations Act or the Canada Business Corporations Act. Shareholders have limited liability, meaning they are not personally responsible for the corporation's debts beyond what they invest. Corporations pay income tax at the corporate level; shareholders pay tax again when dividends are paid out.

Units are issued by partnerships (including limited partnerships) and trusts. A limited partnership issues limited partnership interests (sometimes called LP units) to its limited partners, who have limited liability, while general partners manage the business and bear unlimited liability. Income and losses in a partnership generally flow through directly to the partners for tax purposes, rather than being taxed at the entity level first.

Income trusts and real estate investment trusts (REITs) also issue units, with income flowing through to unit holders in a pass-through structure.

For an Ontario business choosing its structure, the choice between a corporation (shares) and a partnership or trust (units) involves trade-offs in taxation, liability, complexity, and governance. A corporate lawyer and tax advisor can help you evaluate which structure fits your situation.