- Table of Contents
- • What is a Professional Corporation
- • Who should form a Professional Corporation?
- • Who can be a Director of a Professional Corporation?
- • Who can be a shareholder of a Professional Corporation?
- • Exceptions to Limited Liability
What is a Professional Corporation?
Professional corporations (PCs) in Ontario are governed by the Ontario Business Corporations Act (OBCA), as well as the by-laws of the respective profession’s governing body. In addition to obtaining Articles of Incorporation under the OBCA, the professional must receive approval from the relevant governing body of the profession to practice in a PC.
A professional incorporation (P.C.) allows many of the same tax advantages enjoyed by other incorporated self-employed individuals with some very important differences:
- •Professional liability is not limited through incorporation.
- •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” and cannot be a numbered company.
- •The P.C. may not carry on a business other than the practice of the profession.
Members of the following professions would be eligible to operate a professional corporation:
- •Chartered accountants; certified general accountants; lawyers; etc.
- •Most regulated health professionals including chiropractors, dental hygienists, dental surgeons, dieticians, massage therapists, occupational therapists, opticians, optometrists, pharmacists, physicians and surgeons, physiotherapists, psychologists.
- •Professional Engineers.
- •Veterinarians.
Who should form a Professional Corporation?
Any professional who desires:
- •To limit general liability (excludes professional liability).
- •To reduce income tax and increase disposable income.
- • Earns more than required for family needs.
- •Split income in certain situations.
Who can be a director of a Professional Corporation?
All officers and directors of the professional corporation are required to be shareholders of the corporation.
All directors should be member of the same profession.
Who can be a shareholder of a Professional Corporation?
Shareholders of a P.C. are restricted to members of the same profession with the exception that family members of physicians and dentists can hold non-voting shares. Shares of PC cannot be held by a holding corporation with some exceptions.
Exceptions to Limited Liability
A professional corporation offers its shareholders limited liability in certain areas. Generally, a shareholder is liable for the debts and liabilities of the corporation to the extent of his or her investment. Personal assets usually are not at risk. Exceptions include:
- The shareholder personally guarantees a business debt.
- Piercing of the corporate veil.
- Professional malpractice.