Two limited partnerships governed by the laws of Arizona (a common law jurisdiction) holding rental properties were to be treated as partnerships rather than corporations under the two-step approach of CRA to entity classification. Although they had separate legal personality, that by itself did not preclude them from being classified as partnerships. On the other hand, they had various attributes of common law partnerships including:
- from their formation there were two partners carrying on business (the rental operations) with a view to profit (an undertaking to which each partner contributed)
- the general partner acted on behalf of the partners in making and managing the partnership business
- the partners were jointly and severally liable for partnership debts subject to the limited liability of the limited partners
- importantly, the general partner had unlimited liability.