What is a Professional Corporation in Ontario?
An Ontario Professional Corporation Registration is a specific type of incorporation, designed for licensed professionals only, such as doctors, lawyers, dentists, accountants, and engineers, who wish to incorporate their practices. Unlike regular corporations, professional corporations are governed by both the Ontario Business Corporations Act (OBCA) and the regulatory body overseeing the specific profession. These corporations allow professionals to benefit from incorporation, such as potential tax deferrals and limited liability for business debts, while still being personally liable for professional negligence or misconduct.
Setting up a professional corporation can offer advantages, but it’s not suitable for every situation. Regulatory requirements, liability considerations, and tax planning all play a role in determining whether it’s the right structure for your practice.
In this guide, we’ll walk through how to register a professional corporation in Ontario, compare it with other provinces, and explain what obligations and benefits come with it.
Who Can Incorporate as a Professional Corporation in Ontario?
Not every profession is eligible to incorporate.
To qualify, you must be a member of a profession that is regulated by a governing body under Ontario Law.
This includes but is not limited to:
- Physicians (College of Physicians and Surgeons of Ontario)
- Dentists (Royal College of Dental Surgeons of Ontario)
- Lawyers (Law Society of Ontario)
- Accountants (CPA Ontario)
- Engineers (Professional Engineers Ontario)
- Chiropractors, pharmacists, optometrists, and others.
Each regulatory body has its own specific rules and requirements for incorporation, including naming conventions and approval processes.
Key Note: Only members of the same profession can be shareholders of a professional corporation in Ontario; for example, a law corporation cannot have a doctor as a shareholder.
Step-by-Step: Online Ontario Professional Corporation Registration
1. Name Reservation
Before incorporating, you’ll need to reserve a corporate name. You may do a NUANS search where applicable, based on the jurisdiction level.
For professional corporations, the name must:
- Include the professional designation (e.g., “Dr.” or “CPA”)
- End with “Professional Corporation”
- Be approved by your profession’s governing body.
2. Regulatory Approval
Once your name is reserved, you must obtain written approval from your professional regulatory body. This often includes submitting proposed Articles of Incorporation and other supporting documents for review.
3. Articles of Incorporation
Submit the Article of Incorporation! These articles must meet the OBCA requirement and any professional-specific rules.
You’ll need to provide:
- Corporation name
- Professional License Information
- Share structure (typically, once a class of shares is held by licensed professionals only)
- Address and director information
4. Register with the Regulatory College
After incorporation. You may need to register your new professional corporation with your regulatory college and obtain a Certificate of Authorization (or equivalent), which allows the corporation to practice the profession legally.
5. Federal Business Number & CRA Accounts
Register for a Business Number with the Canada Revenue Agency ( CRA).
Depending on your operations, you may need:
- GST/HST account
- Payroll account (if you’ll have employees)
- Corporate tax account
Comparing Ontario with Other Provinces
While the general framework for professional corporations is similar across Canada, there are differences in requirements and procedures. Here’s a snapshot:
| Province | Name Approval by Regulator | Certificate of Authorization | Shareholder Restrictions |
|---|---|---|---|
| Ontario | Yes | Required | Same profession only |
| British Columbia | Yes | Required | The majority must be professionals |
| Alberta | Yes | Required | Some allow non-voting family shares |
| Quebec | Yes | Required | Similar restrictions to Ontario |
| Manitoba | Yes | Required | Generally same profession only |
Each province has nuances, but Ontario has one of the more structured and regulated processes. It’s important to consult your regulatory body and provincial guidelines before incorporating.
Liability & Legal Responsibilities
Incorporating offers some protection from liability, but not from professional errors. A key misunderstanding is that forming a professional corporation shields you from malpractice claims. It does not.
Let’s look at a real-world example of one of our customers:
Dr. A, a licensed physician, incorporates her practice. Later, a patient sues for malpractice. The lawsuit targets Dr. A personally, not just the corporation, because professional liability follows the individual under the law, not the business.
What incorporation can protect against is business debt related, such as office leases, equipment loans, or vendor ocntracts provided there’s no personal guarantee involved.
Also, under OBCA and your profession’s governing legislations, directors and officers are responsible for maintaining corporate records, filing annual returns, and ensuring compliance with ethical and financial regulations. Failing to do so could result in penalties, loss of licensure or both.
Tax Benefits of a Professional Corporation
One of the biggest advantages of incorporating is the potential for tax planning. A professional corporation can:
- Access the small business tax rate: In Ontario, the first $500,000 of active business income may be taxed at a lower rate (around 12.2% as of 2023).
- Defer personal taxes: Income left inside the corporation isn’t taxed at personal rates until it’s withdrawn as salary or dividends.
- Split Income (limited): Although new tax rules TOSI-Tax on Split Income) Restrict income splitting with family members; there are still some planning strategies available with proper advice.
- Hold passive investments: After-tax business income can be invested within the corporation.
However, tax benefits are only meaningful if your practice generates more income than you need to live on. If you’re withdrawing all earnings annually, the benefits may be minimal.
Corporate Maintenance and Compliance
After incorporating, your responsibilities don’t end. To stay compliant:
- File an annual return with the province
- Maintain minute books, shareholder registers, and meeting records
- Renew your Certificate of Authorization with your professional body annually
- Pay corporate taxes and meet CRA deadlines
Your corporation is seperate legal entity. It must follow its own set of rules, separate from your personal finances.
Common Myths vs Facts
| Myth | Fact |
|---|---|
| Incorporating removes all liability | Professional liability remains personal |
| You must incorporate practice | Many professionals operate as sole proprietors |
| Any family member can be a shareholder | Only licensed professionals can own shares |
| You can split income freely with your family | TOSI rules limit this significantly |
| Incorporation is a one-time process | Ongoing compliance is required annually |
Where to Register Your Professional Corporation Online
You can easily get started with an Ontario Professional Corporation registration anywhere in Canada with us!
At Business Canada, we help individuals understand what’s required to register or incorporate across the country.
Final Thoughts
Incorporating as a professional corporation in Ontario offers significant benefits, but it also bring responsibilties. It’s not just a tax strategy, it’s a legal and operational shift in how your professional services are delivered. Understanding your profession’s regulatory requirements, liability implications, and the potential costs and benefits is essential.
Before moving forward, it’s wise to speak with a lawyer, business registry professionals like us, or a tax advisor familiar with professional corporations in Ontario, or anywhere else. Every practice is different, and what works for one profession may not work for the other.
Frequently Asked Questions
What professions are allowed to form a professional corporation in Ontario?
Only licensed professionals governed by regulatory bodies, such as doctors, lawyers, accountants, and engineers, can form professional corporations.
Do I need regulatory approval to incorporate a professional corporation?
Yes. You must receive written approval from your profession’s regulatory body before incorporating.
Can my spouse or children own shares in my professional corporation?
No. Only licensed members of the same profession can hold shares in a professional corporation in Ontario. Although this doesn’t stop a professional from also opening a regular or standard corporation at all.
Is malpractice liability protected by a professional corporation?
No. Professionals remain personally liable for any negligence or misconduct.
How much does it cost to register a professional corporation in Ontario?
Pricing varies by services added onto your incorporation package through Business Canada.
Can I register my professional corporation online?
Yes, incorporation can be completed through our online platform.
Do I need a lawyer to set up a professional corporation?
While not legally required, it’s highly recommended to consult with a lawyer or accountant familiar with professional incorporations.
Does a professional corporation need its own CRA business number?
Yes, you’ll need to register the corporation for a federal business number, and possibly for HST, payroll, and corporate income tax accounts.