Joint Ventures: Practical With Tax Advantages For Succession Planning

If you're considering retirement or expanding your farming operation, a joint venture arrangement may give you some much-needed flexibility and offer tax advantages.

A joint venture has some similarities to a partnership, but with key differences. A partnership involves partners carrying on one business together, typically for an indefinite period. A joint venture, on the other hand, involves parties with separate businesses agreeing to collaborate for a specified period of time. Joint venturers thus have the ability to define the scope of their commitment to the joint venture and to limit their liability exposure.

The difference in structure is also reflected in the way they are taxed. Under the Income Tax Act (Canada) (ITA), the small business deduction (SBD) allows Canadian-controlled private corporations to pay a lower corporate tax rate (between 9–13% depending on the province) on their first $500,000 in active business profits. For partnerships, the ITA