WHAT IS A PROFESSIONAL CORPORATION?
A professional corporation is a type of corporation reserved for individuals holding professional designations. To create a professional corporation, you must be a member of that profession and must be granted authority to incorporate a professional corporation from your respective governing legislation. Generally, authorization is provided by the issuance of a Certificate of Authorization. Professionals authorized to form professional corporations include but are not limited to:
- Chartered accountants;
- Social workers;
- Certain healthcare workers; and
It is important to note that the governing body of the profession is responsible for the certification of professional corporations under their regulation. For example, lawyers wishing to operate as a professional corporation must be certified by the Law Society of Ontario to form and operate as a professional corporation. In addition to initial fees for issuing a Certificate of Authorization, there may be annual fees and renewal procedures in place that must be paid or complied with in order to continue operating as a professional corporation.
GENERAL RULES AND RESTRICTIONS APPLICABLE TO PROFESSIONAL CORPORATIONS
- Name: A professional corporation must include the words “professional corporation” in English or “Société Professionnelle” in French. This means that a professional corporation cannot be a numbered corporation.
- Shareholders: Depending on the regulatory body, there may be restrictions placed on who can own shares in the professional corporation. For example, only lawyers can be shareholders in a law professional corporation regulated under the authority of the Law Society of Ontario.
- Articles of Incorporation: It is important to check with the relevant regulatory body as to whether specific wording must be included in the articles of incorporation of the professional corporation. Failure to include proper wording will most likely lead to the application for authorization being denied by the relevant governing body.
- Business Activities: There may be restrictions placed on the business activities that are authorized to be practiced by a professional corporation. For example, lawyers may not carry on business other than the practice of law with their professional corporations. This, however, does not mean that they cannot carry out activities that are related or ancillary to the practice of law such as the investment of surplus funds. In the case of lawyers, the restriction regarding the business activities of the corporation is set out as a clause in the articles of incorporation filed with the Ministry of Public and Business Service Delivery.
- Liability: While corporations generally shield the shareholders from personal liability regarding the affairs of the corporation, professional corporations do not limit the professional liability of those who hold their shares. This means that the shareholders have unlimited liability for their actions related to the practice of their profession. Shareholder liability is limited in instances related to commercial debt and acts not related to the practice of the profession.
HOW WE CAN HELP
If you are looking to incorporate a professional corporation, our legal team can advise you on the process and help you incorporate your professional corporation. When you work with us to incorporate your professional corporation, we will conduct an initial consultation where we will assess your personal and business situation and answer any questions you may have about forming a professional corporation. Some of the services we provide in registering a professional corporation include:
- Initial research on rules and regulations applicable to your professional corporation depending on your profession.
- NUANS search to check for existing companies with similar names.
- Incorporation including the drafting and filing of articles of incorporation with the Ministry of Public and Business Service Delivery.
- Preparation of a complete and up-to-date minute book including by-laws, initial resolutions, director’s register, shareholder’s register, officer’s register, corporate summary, list of the corporation’s real properties, share certificates, share transfer register, and a copy of the initial return filed with the Ministry of Public and Business Service Delivery.
Most importantly, when you incorporate your professional corporation with us, we will ensure that your professional corporation adheres to the guidelines set out by your profession’s governing act. If you are planning on entering into business with other shareholders, we can help draft a shareholder agreement or unanimous shareholder agreement as necessary at the time of incorporation.
The process of incorporating a professional corporation can be complicated and it may be to your advantage to hire a business lawyer to help ensure your professional corporation is in compliance with the relevant rules and regulations set by the governing authority. For further information about professional corporations, visit the Business Law Insights section of our website.
If you are looking to form a professional corporation or have questions about forming one you can contact us to set up an initial consultation, during which a business lawyer will answer any questions you may have regarding professional corporations.