Professional Corporations

What is a Professional Corporation?

A professional corporation is a legal structure that allows licensed professionals (Such as doctors, lawyers, accountants, and engineers etc.) to operate their practices as corporations. For more details see end of this page-

Features of Professional Corporations

• Only licensed professionals in regulated fields can form a professional corporation.
• Professional Corporations can only offer services related to the professional’s field.
• The governing body’s approval is needed before incorporating (College of Physicians and Surgeons of Ontario, Law Society of Ontario).
• Must include legal suffix as “Professional Corporation“. For example, “Dr. Smith Medicine Professional Corporation.” But there are some exceptions in some provinces.
• Must follow Subject to Business corporate laws and the rules of governing professional bodies.

Why Should I Form a Professional Corporations?  

• Ownership is restricted to only licensed professionals in the same field.
• Income is taxed at corporate tax rates, that is lower than personal taxes.
• Allows income splitting with family members.
• Family members may hold non-voting shares that reduce the overall tax burden.
• Only licensed members of the same profession can be voting shareholders.

What is the purpose of a professional corporations?  

Professional Corporation gives professionals a legal business structure that allows professionals to practice their profession. It offers a balance between a sole proprietorship and a corporation.

Who Can Start a Professional Corporation?

Any professionals who have valid professional licenses within their field can incorporate a Professional corporation. Such as the following-

• Lawyers
• Chartered Professional Accountants (CPAs)
• Doctors and other healthcare professionals
• Registered Nurses
• Chiropractors
• Architects and Engineers
• Optometrists
• Psychologists
• Registered Massage Therapists

Many professions can incorporate a Professional corporation alongside the above-mentioned professionals.

 6 Steps to Register a Professional Corporation

• Professional corporation name. Please see the instructions of your Governing body
• Prepare and draft professional Articles of Incorporation. In some cases, you should submit it to the governing body
• Need Consent and approval from the regulatory body.
• File the Articles of Incorporation with the Registry Office.
• Obtain a Business Number from CRA for your Professional corporation
• Prepare a professional minute book and Bylaws

Difference Between a Professional Corporation and a Standard Corporation?

Professional Corporation: Only licensed professionals can incorporate a Professional Corporation. They also need to get approval from governing bodies.

Standard Corporation: Anyone can start a Standard corporation. Any individual or group can form a standard corporation.

How Does a Professional Corporation Compare to a Limited Liability Partnership (LLP)?

Limited Liability Partnership (LLP): For licensed professionals who want to operate jointly but remain individually liable for their work can register a Limited Liability Partnership (LLP).

Professional Corporation: For licensed professionals who want to incorporate their practice as a corporation.