Incorporating a professional corporation in Ontario is a strategic step put forward for specialists of regulated professions, including laws, medicine, accounting, and engineering. An Ontario professional corporation has several advantages, such as attracting tax benefits and offering protections against liability while still maintaining strict regulatory oversight by professional bodies.
This is more of a step-by-step guide that will walk you through the process of setting up a professional corporation in Ontario, the steps involved, and the important things required for such incorporation to be successful.
What is a Professional Corporation?
Before going further into any incorporation details, it is necessary to have an idea as to what a professional corporation is. A professional corporation in Ontario is basically a corporation type reserved for members of the regulated professions. This would include health professionals, lawyers, accountants, architects, and many more. Unlike the regular corporations, professional corporations would be subject to the OBCA – Ontario Business Corporations Act – and the regulations imposed by their governing professional bodies.
Advantages of Setting Up a Professional Corporation in Ontario
The are a lot of advantages of incorporating professional corporations in Ontario:
- Tax Benefits: Professional corporations often pay lower corporate tax rates that allow income splitting and tax deferral.
- Limited Liability: Although not completely exempt from professional liability, the personal assets of the shareholders (professionals) may be protected from business debts and liabilities.
- Succession Planning: A professional corporation provides an entity that assures continuation of the business, which may be quite important in succession planning.
Steps for Incorporating of a Professional Corporation in Ontario
If you are ready to start a professional corporation in Ontario, here are key steps involved.
1. Check Your Eligibility
In Ontario, professional corporations can only be registered by licensed professionals in specific regulated professions. This is because professional corporations are subjected to specific rules and supervision by the governing body of the profession as well as the Ontario Business Corporations Act (OBCA). The following professionals are qualified:
Doctors and Medical Practitioners: Members of the College of Physicians and Surgeons of Ontario (CPSO)
Lawyers: Members of the Law Society of Ontario (LSO)
Accountants: Members of CPA Ontario (Chartered Professional Accountants of Ontario)
Engineers: Members of Professional Engineers Ontario (PEO)
Architects: Members of the Ontario Association of Architects (OAA)
Veterinarians: Members of the College of Veterinarians of Ontario (CVO)
Chiropractors: Members of the College of Chiropractors of Ontario (CCO)
Dentists: Members of the Royal College of Dental Surgeons of Ontario (RCDSO)
Each of these professionals is responsible for making sure that the corporation’s shareholders are all licensed practitioners of the same field. Before submitting their articles of incorporation to the province, they also need to get a Certificate of Authorization from their governing body. This authorization guarantees that the professional corporation complies with the strict guidelines set in place by the regulatory body for the profession.
2. Choose and Reserve Your Corporation Name with a NUANS Report
The first steps in forming a professional corporation in Ontario include choosing a unique name, something that reflects your profession. In naming a Professional Corporation, there are naming conventions that must be followed which includes the use of terms like “Professional Corporation” or “PC,” which shows its regulated nature.
You will need a NUANS report to confirm the availability of your desired name. Through this report, an extensive search of all existing business names in Canada is conducted and makes sure that your proposed name doesn’t conflict with any registered or reserved name in Ontario.
3. Obtain Certification from the Professional Association
You will need to obtain certification from your professional body before incorporating a professional corporation in Ontario. The requirements vary depending on the particular body, but most will confirm that all shareholders are members of the same self-regulated profession.
4. File Articles of Incorporation
In this regard, you will need to file the relevant documents to legally incorporate a professional corporation in Ontario:
Articles of Incorporation: These are forms that contain the crucial details on the name of the corporation itself and its share structure, along with a registered office.
Certificate of Authorization: This is a document uniquely given by your professional body, which is a requirement you need before registering a professional corporation in Ontario
You can send these forms through the post or incorporate professional corporations in Ontario online for faster processing. The latter is highly recommended for convenience and efficiency.
5. Register for Business Numbers and Permits
Once you have incorporated, the next step will be registering the professional corporation in Ontario with the relevant authorities which may include:
- Business Number from the Canada Revenue Agency (CRA)
- HST registration (if applicable)
- Payroll accounts, if your corporation will have employees
You may want to consider registering your professional corporation in Ontario using an online service provider. This will cut down a lot of the paperwork.
6. Get Liability Insurance
Although incorporation may provide some liability protection, as a professional you may be held liable for professional misconduct or negligence. Professional liability insurance may well be required, depending upon your profession, and covers you against claims of liability resulting from your services.
7. Set Up Corporate Records and Books
A professional corporation Ontario should also maintain appropriate corporate records in order to ensure legal compliance:
- Minutes of meeting
- Resolutions
- Shareholder information
- Accounting records
Failure to maintain such accurate records may attract some penalties and, in adverse conditions, lead to dissolution of the corporation.
How to Incorporate a Professional Corporation Online in Ontario?
The easiest way to set up an Ontario professional corporation online is through Nuans Canada. We have made the entire process hassle free. Our services assist you in submitting available forms electronically, verify name availability, and offer corporate record management tools.
Setting up an Ontario professional corporation online offers many benefits, which include:
- Faster Processing: On the whole, online filings are usually processed way faster compared to paper filings.
- Less Paperwork: With digital platforms, it reduces a lot of paperwork hassle.
In other words, be it for an altogether new entity or converting a sole proprietorship, Nuans Canada has made professional corporation incorporation a piece of cake in Ontario.
Taxation and Financial Planning of a Professional Corporation
After starting a professional corporation in Ontario, understanding the tax implications is crucial. Professional corporations are given the small business deduction which means that they have to pay reduced taxes on the first $500,000 of active business income.
It would be essential to work with a tax advisor who is familiar with the unique tax planning opportunities of professional corporations in Ontario, including income splitting and deferral by leaving income within the corporation.
Managing and Growing Your Professional Corporation
You must concentrate on compliance and expansion after forming a professional corporation in Ontario. File yearly returns, maintain current records, and notify your professional association on a regular basis about any changes to the company’s shareholders or organizational structure.
Financial planning, making sure industry rules are followed, and looking for growth opportunities—like adding more services or hiring more experts—are all essential components of successful business management.
Frequently Asked Questions about Incorporation of Professional Corporation in Ontario
Can I incorporate myself as a professional?
Yes, if you are a licensed member of a regulated profession, you can incorporate yourself under a professional corporation, but you must follow the rules of your governing body.
How does a professional corporation differ from a regular corporation?
A professional corporation is designed especially for licensed professionals, with additional regulations by professional bodies as opposed to an ordinary corporation.
Conclusion
From tax benefits to limited liability, the incorporation of a professional corporation in Ontario offers a number of advantages to regulated professionals. Whether you want to start a professional corporation in Ontario or convert your current practice into a professional corporation, the process is not simple and requires a great deal of planning with attention being paid to regulatory requirements.
By choosing NUANS Canada for your incorporation process, you are choosing efficiency and knowledge, which will enable you to establish your professional corporation in Ontario with ease and confidence.