A Professional Corporation in Ontario allows licensed professionals such as doctors, dentists, lawyers, accountants, and other regulated professionals to operate their practice through a corporation while complying with the requirements of their governing professional body. Professional corporations are incorporated under the Ontario Business Corporations Act and are subject to additional rules imposed by the relevant professional regulator.
Pawlina Law assists professionals across Ontario with incorporating and organizing professional corporations, ensuring that the articles of incorporation, corporate structure, and regulatory approvals comply with applicable legal requirements. These professions include:
Typically, approval from a professional regulator is not required to incorporate a professional corporation in Ontario. However, after incorporation, most professional corporations must obtain a Certificate of Authorization (or similar approval) from their governing professional regulator before the corporation can provide professional services. In some professions, the regulator may also allow or require name pre-approval before incorporation. This process ensures that the proposed corporate name complies with the naming rules of the professional college and will be acceptable when applying for the Certificate of Authorization. We can assist with incorporating professional corporations and with obtaining the necessary regulatory approvals following incorporation.
No. While our firm is located in Toronto, Ontario, our practice is fully virtual. We regularly assist professionals throughout Ontario with incorporating professional corporations and related regulatory matters. In fact, a surprising number of our clients are located across the province, including in the Ottawa region. Regardless of where you are located in Ontario, we can assist you with incorporating an Ontario professional corporation and guiding you through the required steps.
In most cases, incorporating a professional corporation in Ontario can be completed within a few business days once all required information has been provided. After incorporation, you will typically need to apply for a Certificate of Authorization from your professional regulator before the corporation can begin providing professional services.
No. In most cases, applications for a Certificate of Authorization must be completed directly by the professional through their regulator’s online portal using their personal login credentials. Because these applications are submitted through your account with your professional regulator or college, we do not complete these applications on your behalf. However, we provide unlimited support to assist you in completing the process. We will guide you through the application requirements, review the necessary documents, and answer any questions you may have while preparing and submitting your application. Additionally, Certificates of Authorization typically must be renewed annually. For that reason, we believe it is important that you become familiar with the process yourself. We provide ongoing support and are happy to answer any questions so that you can confidently maintain and renew your Certificate of Authorization going forward.
A professional corporation cannot register as a licensed member of the profession nor can it be a registered practitioner of a profession. Rather, it may obtain a permit that allows it to engage in the practice of a profession. As governing professional bodies, such as the Law Society of Ontario or the Royal College of Dental Surgeons of Ontario, have different rules and criteria for professional corporations, the specifics of professional corporations will vary from profession to profession. Compared to a regular Ontario Business Corporations Act (“OBCA”) corporation, a Professional Corporation generally allows one or more members of the same profession to be shareholders in a Professional Corporation.
Generally, all officers and directors of the professional corporation are required to be shareholders of the corporation. The name of the professional corporation must include the words “Professional Corporation” or “Société Professionnelle”. A Professional Corporation cannot be a number name. Professional Corporations in Ontario can only be incorporated under the OBCA.
No (mostly), as least tot for professional negligence. One important difference between a regular OBCA corporation and a Professional Corporation is the partial exclusion of limited liability. Typically, a Corporation insulates shareholders in their personal capacity from corporate liability. However, in a Professional Corporation, shareholders only have limited liability in certain areas. Generally, a shareholder is only liable for the debts of the corporation to the extent of their investment. 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.
A professional 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. This liability structures would be the same as if the professional was practicing through a partnership.
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. The tax considerations of a Professional Corporation will be dealt with by your accountants or tax planners. Here is a useful article exploring the tax benefits of Professional Incorporation. At times, it might be more efficient to use an RRSP instead of a professional corporation to achieve tax efficiency objectives. Jamie Golombek explores the use of an RRSP versus a Professional Corporation in this article.
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.
Those professionals who are permitted to sell their practices can also benefit from the Capital Gains Exemption. Where the professional corporation has value, the shareholder-professionals can sell shares of their Professional Corporation, then claim the Capital Gains Exemption and receive the first $824,176 of the capital gain tax-free.
Most Professional Corporation do not allow shareholders of the corporation to be persons other than those licensed by the professional. However, some professionals, such as dentists and doctors, can benefit from income splitting. Income splitting for Professional Corporation is complex and a professional tax adviser or lawyer is necessary to ensure ones does not trigger the attribution rules.
The disadvantages of a Professional Corporation are the additional costs and documentation. Professional Corporation typically result in additional legal and accosting costs for the professional during both the set up and on an annual basis. There are certain expenses which are associated with incorporating. If you hire a professional to incorporate on your behalf. There would also be additional yearly accountant fees around $2,000.00 – $3,000.00 per year. However, some professionals could reduce their tax bill by tens of thousands of dollars per year. A well coordinated legal and tax strategy could assist you in achieving substantial tax savings.
Each Professional Corporation is different and will require input from accounting and legal professionals before being created. Generally, the articles of incorporation, in addition to all other requirements, must limit the activities of the corporation to the profession. Professional corporations may also subject to additional limitations and regulations imposed by their respective professional bodies. Registering a Professional Corporation is complicated, but Pawlina Law can assist you with setting up your Professional corporation.
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