What is a professional corporation?

Professional Corporation

Professional Corporation

What is a professional corporation? 

A professional corporation operates much like a business corporation with few exceptions. A professional corporation has to abide by the regulations set by the Business Corporations Act (Ontario) and by the respective governing body. A professional corporation  can-only carry on activities of its profession. A professional corporation must meet the requirements of its governing body and receive a Certificate of Authorization or equivalent.

Many professionals are allowed to operate their business as a professional corporation.  Examples of professions that can operate under a professional corporation:

 Accountants  Lawyers  Medical professionals
 Engineers  Architects  Social Workers
 Veterinarians  Pharmacists  Chiropractors

Historically professionals have operated through a sole proprietorship or partnership which limits tax planning  and results in higher taxes (see “How to setup a business in Ontario” for more in depth discussion). Professionals have lobbied the provincial governments which have allowed them to incorporate their practices.

Does a professional corporation have limited liability? 

In “How to setup a business in Ontario” we discussed that a corporation is a separate legal entity and it has limited liability. A professional corporation is slightly different and does NOT have full limited liability (exception for architects and engineers). A professional corporation only offers limited liability in certain areas. When it comes to business debts, the shareholder is only liable up to his or her investment in the business.  However, in other circumstances such as malpractice, the corporate veil is lifted resulting in unlimited liability.

 

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How to setup a business in Ontario?

What type of structure is right for you?

How to setup a business in Ontario?

Setting up a business can be an overwhelming task with a lot to comprehend. It all starts with a dream and a vision, but how do you turn that dream into reality. The dream of becoming your own boss and having the freedom to make your own decisions can be a complicated one at the beginning. Once you have determined on the actual business and its inner workings, you will have to move on to the next step of executing that business. This is where a lot of people get stuck and don’t really know where to go next.

In this article I will explore and shed light on several different business structures available in Ontario. I will also explain how to be in compliance with Canada Revenue Agency (CRA) tax obligations.

The three most common structures are Sole proprietorship, Partnership, and Incorporation.

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