The Royal College of Dental Surgeons of Ontario (“RCDSO”) regulates dentists in Ontario.  The RCDSO allows it registrants to practice as a professional corporation.  Operating as a professional corporation may be beneficial for dentists as it may limit their tax exposure.

Incorporating a Professional Corporation

When incorporating a professional corporation, it is important that the articles of incorporation comply with the Regulated Health Professions Act.  In Ontario, a Dentistry Professional Corporation is considered to be a health profession corporation and must be an Ontario Corporation.  A Canada corporation cannot be used as a Dentistry Professional Corporation in Ontario.

Moreover, in accordance with subsection 3.2(2) of the Business Corporations Act (Ontario), O. Reg. 39/02: Certificates of Authorization, and O. Reg. 665/05: Health Profession Corporations, a professional dentistry corporation shall satisfy the following conditions:

1. Each issued and outstanding voting share of the corporation is legally and beneficially owned, directly or indirectly, by a Dentist and each issued and outstanding non-voting share of the corporation is owned in one of the following ways:
   1. It is legally and beneficially owned, directly or indirectly, by a dentist.
   2. It is legally and beneficially owned, directly or indirectly, by a family member of a voting dentist shareholder.
   3. It is owned legally by one or more individuals, as trustees, in trust for one or more children of a voting dentist shareholder who are minors, as beneficiaries.
2. All officers (i.e. President, Secretary, CEO, CFO) and directors of the corporation shall be shareholders of the corporation who are members of the RCDSO.
3. The articles of the corporation provide that the corporation cannot carry on a business other than the practice of dentistry and activities related to or ancillary to the practice of dentistry.

In order to ensure your Dentistry Professional Corporation is properly incorporated and organized, a lawyer should be retained. Pawlina Law can assist you with setting up your Dentistry Professional Corporation. Failing to properly set up your Dentistry Professional Corporation can result in delays in using your professional corporation or having to file costly Articles of Amendment to ensure your corporation complies with the requirements.

Certificate of Authorization for a Dentistry Professional Corporation

Once your Dentistry Professional corporation is incorporated, it must first obtain a Certificate of Authorization before practicing.  A professional corporation cannot register as a licensed member of the RCDSO, nor can it be a registered practitioner of dentistry. Rather, a registrant may obtain a Certificate of Authorization for a Dentistry Professional Corporation which allows it to engage in the practice of the profession. To obtain a Certificate of Authorization, a registrant much complete and submit an application.

Naming Your Dentistry Professional Corporation

The name of a dentistry professional corporation must meet the following standards which are described in subsections (2) to (5) of section 1 of O. Reg. 39/02:

• The name of the corporation must meet the requirements in section 3.2 of the Business Corporations Act and must not violate the provisions of any other Act, which include:
  • The name of the corporation shall include the words “Professional Corporation” or “société professionnelle” and shall comply with the rules respecting the names of professional corporations set out in the regulations and with the rules respecting names set out in the regulations or by-laws made under the Act governing the profession.
  • The name cannot be a numbered company.
• The name of the corporation must include the surname of one or more shareholders of the corporation who are dentists, as the surname is set out in RCDSO’s register, and may also include the shareholder’s given name, one or more of the shareholder’s initials or a combination of his or her given name and initials.
• The name of the corporation must include “Dentistry Professional Corporation” or the respective French variation.
• The name of the corporation must not include any information other than the information permitted or required by O. Reg. 39/02. It is common for individuals to want to list a title (i.e. Dr.) or their academic or professional credentials in the name of their professional corporation. However, this is prohibited.

Thus, the following options are available for a dentist named John Jacob Smith:

• John Smith Dentistry Professional Corporation
• John J Smith Dentistry Professional Corporation
• J Smith Dentistry Professional Corporation
• Smith Dentistry Professional Corporation
• Smith Dentistry Professional Corporation (Albeit, this name could already have been registered and no two corporations in Ontario are permitted to have the same name)

In our opinion, the shortest possible option should be chosen.

Partial Exclusion of Limited Liability

One important difference between a regular Ontario corporation and a Professional Corporation is the partial exclusion of limited liability. With the exception of a few scenarios, due to subsection 3.2 (2) of the Business Corporations Act, a corporation typically insulates shareholders in their personal capacity from corporate liability. However, in a Professional Corporation, shareholders only have limited liability in certain areas. In a Professional Corporation, for the purposes of professional liability, the acts of a professional corporation are deemed to be the acts of the shareholders, employees or agents of the corporation. The liability of a member for a professional liability claim is not affected by the fact that the member is practicing the profession through a Professional Corporation. Thus, a corporation will not protect a dentist from a negligence claim.

A dentist is jointly and severally liable with a Professional Corporation for all professional negligence claims made against the Professional Corporation in respect of errors and omissions that occurred while the person was a shareholder of the corporation. Thus, shareholder-professionals remain liable both for their own individual negligence and for the negligence or other breach of other professionals who are employed by the corporation. Conversely, a Professional Corporation can shield a dentist from other legal claims, such as breach of contract for the Professional Corporation’s commercial lease.

Benefits and Drawbacks of a Dentistry Professional Corporation

There are several advantages to providing professional services using a Professional Corporation. The main advantages are the potential tax planning advantages. For example, having a Professional Corporation can provide opportunities for tax deferral, the use of the lifetime capital gains exemption, and flexibility in remuneration. Professional Corporations also provide limited protections from creditors and the ability to pay non-deductible expenses from the Professional Corporation. Setting up a Professional Corporation is most useful for professionals who earn more income than they need, allowing them to keep surplus billings in the Corporation. These surplus billings will likely be taxed at a lower rate when retained in the Corporation and can be reinvested in stocks, bonds, or GICs, allowing the professional to accumulate additional wealth in their Professional Corporation which can be paid out to the dentist at their direction. Other benefits of incorporation include:

• Ownership is transferable to another person provided that they are a Dentist
• As long as filings are maintained and the corporation is not dissolved, the corporation’s existence is continuous

Typically, it is a dentist’s accountant or tax planner that advises the dentist to complete a professional incorporation. Pawlina Law does not provide clients with tax advice. Only a client’s accountant or tax planner is sufficiently familiar with their tax scenarios to advise them on whether pursuing a professional incorporation is tax efficient for them. Pawlina Law has worked with numerous accountants to assist health professionals with setting up their Professional corporation.

The disadvantages of a dentistry professional corporation are the additional costs and documentation. Professional Corporations typically result in additional legal and accounting costs for the professional during both the set up and on an annual basis. These costs are further explained, below.

How Much Does a Dentistry Professional Corporation Cost?

There are certain costs which are associated with incorporating. These costs can be broken down into legal costs, accounting costs, and regulatory costs in the following manner:

• Legal Costs – There are initial legal costs for incorporation and annual costs that will be incurred for corporate maintenance. Our professional fee to incorporate a Dentistry Professional Corporation is $780.00 + HST + Disbursements. Disbursements are expenses that we incur on your behalf, such as an incorporation filing fee. More information about this pricing is available here.  At the time of writing this article, the disbursements are estimated to be $450.29 (inclusive of HST). Our services include everything you need to properly set up your Dentistry Professional Corporation. Your Dentistry Professional Corporation will have annual maintenance requirements. The professional fees to complete this annual maintenance are $300.00+HST per year plus another $100.00+HST if dividends are declared.
• Accounting Costs – There would also be additional yearly accountant fees around $1,500.00 – $2,500.00 per year. However, some dentists could reduce their tax bill by tens of thousands of dollars per year.
• Regulatory Costs – To obtain a Certificate of Authorization, a dentist must pay the Royal College of Dental Surgeons of Ontario a fee of $750.00 or a renewal fee of $175.00.  Additionally, a corporate profile report must be obtained. This report can be obtained for $8.00 by the Dentist using the Corporation’s online profile and Ontario’s Online Business Registry.

Conclusion

Each dentistry professional corporation is different and will require input from accounting and legal professionals before being created. A well coordinated legal and tax strategy could assist a dentist in achieving substantial tax savings. Registering a dentistry professional corporation is complicated, but Pawlina Law can assist you with setting up your Professional Corporation.  We are happy to have a courtesy call with Dentists to answer any question they may have.  Please do not hesitate to contact us.