Pacific Income Capital Corporation vs. Pacific Income LP

I often refer to the lending business that I started in 2017 as Pacific Income. But, in fact, the venture is a combination of two separate entities: Pacific Income Limited Partnership and Pacific Income Capital Corporation. If you’re considering getting financing from us, then you’ll probably see that both companies are included within the legal paperwork. To explain why, in this article, I’ll provide a broad outline of their relationship and what they each do.

Before setting out with Pacific Income, my partner and I discussed with two lawyers and an accounting firm how to structure the business. We were given three options: creating a corporation, a trust or a limited partnership for it. Based on their advice, we made a decision that we felt would be best from both a taxation and a legal perspective in Canada.

As the name indicates, Pacific Income Limited Partnership is a limited partnership. This is a type of business structure that allows the owners (known as limited partners) to participate in the earnings of the company without assuming any legal liability for its operations. Therefore, if the company has debts or is subjected to litigation, then the limited partners would generally be without risk. But in return, the limited partners do not have the power to manage the company.

Moreover, the LP, itself, does not usually pay taxes. Instead, the tax burden is passed on directly to the limited partners. For instance, if I owned 50% of the limited partnership units (LPUs) and had a marginal income tax rate of 35%, then 50% of the LP’s earnings would be passed onto me and I would pay taxes on them based on my personal marginal rate.

Who Manages Pacific Income LP?

So, if the limited partners don’t run a limited partnership, then who does?

Well, the manager of an LP is called the general partner. It’s sort of like the board of directors for a corporation or the trustees for a trust. In our case, Pacific Income Capital Corporation is the general partner of Pacific Income LP. It controls the business’ operations and has unlimited liability for the decisions that it makes for the partnership. As our circumstances show, the general partner does not have to be a person. It can be another company.

Technically, then, when we formed Pacific Income, we did so as Pacific Income Capital Corporation. Then, that company helped form Pacific Income Limited Partnership.

Now, part of Pacific Income’s business is mortgage lending. However, limited partnerships in Canada are not allowed to own real estate. As such, when we fund mortgage loans, we will often register the lien in favour of the general partner, depending on the advice of our legal team. So, Pacific Income Capital Corporation has another function: it can allow the LP to collateralize its loans with real estate.


I’ve learned that it’s important to structure a business thoughtfully. It’s worthwhile to spend the time and money on professional advisors to help ensure that one’s venture and partners are well-suited for the legal and tax landscape.