Professional Corporations
To operate your
practice as a Professional Corporation (PC) you must be a member of a profession whose association allows its members to practice through a
corporation. Legislation typically
requires that only those professions that are governed by a professional
governing body or association as provided by law can incorporate a professional
corporation.
Each province
has different laws and rules as to which professions have these governing
bodies. Generally, professions that can incorporate a professional corporation
include: Accountants, Architects, Engineers, Attorneys, Physicians, Dentists, Psychologists,
Social Workers, Veterinarians and Engineers among others.
Business vs Professional Corporations: What
the difference?
A professional
corporation resembles a business corporation, requiring compliance with
corporate law, but also the rules and regulations of professional licensing
bodies. Professional
corporations offer tax advantages but have don’t offer the same level of
limited liability protection as typical business corporations. Here are some
differences:
Ownership
Conditions
- All ownership shares (or a minimum
percentage) must be owned by licensed individuals licensed in the
profession. Some associations allow for immediate family to own shares.
Directorship
Restrictions
- At least one director (or a majority, or
even exclusively) must be licensed in the profession.
Activities limited to
Profession
- The articles of
incorporation limit the activities of the corporation to the profession.
- Professional corporations
are typically required to use the name of the professional as part of the
corporate name and have the words "Professional Corporation" as part
of its legal name. For example “John Smith Lawyer Professional Corporation”.
Liability Issues
- A professional
corporation offers its shareholders limited liability in certain areas. A
shareholder is not liable for the “business” operating debts and liabilities of
the PC. However, agents of the
corporation may be held personally responsible for liabilities arising out of
their services to the corporation.
Malpractice insurance can be purchased by the corporation to cover agents
for liabilities arising out of their services to the corporation.