What is professional incorporation?
Professional incorporation allows regulated professionals to offer their professional services (as well as any related or ancillary services) while enjoying many of the tax (deferring tax, small business exemptions, etc.) and non-tax advantages available to other incorporated self-employed individuals.
Who qualifies as a ‘regulated professional’?
The professions eligible for professional incorporation vary from province to province. In Ontario, under Ontario’s Business Corporations Act (“OBCA”), members of professions regulated by a professional body are allowed to incorporate including lawyers, medical and health professionals, accountants, engineers, architects, social workers and veterinarians.
Is my business eligible for professional incorporation?
Ordinarily, all shareholders in a professional corporation must be members of the same regulated profession. Directors and officers of the professional corporation must be shareholders of the corporation, and thus members of the same regulated profession. However, in Ontario, medical professionals are now allowed to professionally incorporate with immediate family members as non-professional, non-voting shareholders.
How does professional incorporation differ from other models of incorporation?
While incorporation generally insulates shareholders from personal liability for corporate liabilities, professional incorporation does not limit shareholders’ personal liabilities for negligence and malpractice. Governing bodies of regulated professions are able to hold shareholders accountable for their professional corporations’ actions. However, shareholders of a professional corporation may still benefit from limited liability in other business dealings to the extent that there has been no personal guarantee.
What do I need to do to incorporate?
If looking to incorporate your practice, you can consult your governing professional body for incorporation conditions specific to your profession. You may be required to obtain certificates from your professional regulatory body and fulfill specific requirements as set by your professional regulatory body. For example, any lawyer or paralegal wishing to incorporate as a professional corporation must fulfill the requirements set out in the Law Society Act, the OBCA and the Law Society’s By-Law 7.
Are there any further restrictions on a professional corporation?
A professional corporation cannot have a numbered name. Furthermore, a professional incorporation must have the words “Professional Corporation” or “Société Professionnelle” in their corporate name.
Nick Wright is a Toronto business lawyer experienced with professional incorporations. Contact him now at nick AT wrightbusinesslaw DOT ca to arrange a time to discuss incorporating your professional practice.
This article and the contents herein are for informational purposes only and do not constitute legal advice. Readers are advised to seek legal counsel prior to acting on any matter discussed herein. We take no responsibility for any third-party sites linked, nor is the presence or absence of a link an indication of my endorsement of views expressed.