Some professionals cannot just incorporate the ordinary way. Doctors, dentists, accountants, lawyers, engineers, and other regulated professionals who want the benefits of a corporation use a specific structure: the professional corporation. It works much like a regular corporation, with a few important differences and one big misconception.
Here is how professional corporations work in Canada.
What a professional corporation is
A professional corporation is a corporation through which a licensed professional carries on their practice. It is subject to both the usual corporate law and the rules of the profession's regulator, which is why it is treated as its own category. The profession is regulated, so the corporation that practises it is regulated too.
Who can form one
Which professions can incorporate, and on what terms, is set by each province and each regulatory body. Common examples include physicians, dentists, chiropractors, accountants, lawyers, and engineers, but the specifics vary. Your professional regulator, not the corporate registry, is the authority on whether and how you can incorporate.
How it differs from a regular corporation
- The name usually has to follow the regulator's rules, often including the professional's name and the profession.
- Ownership is frequently restricted to members of the same profession, so you cannot always bring in outside shareholders.
- You typically need a certificate of authorization or permit from your regulator, on top of incorporating.
- The rules differ by province and by profession, so two professionals may face different requirements.
The big misconception about liability
People assume a professional corporation shields them from malpractice claims the way a regular corporation shields owners from business debts. It does not. A professional corporation generally does not protect you from liability for your own professional negligence. You remain responsible for your professional work. What it can offer is the corporate structure and the tax planning that comes with it.
Why professionals still incorporate
The draw is usually tax. A professional corporation can access the small business rate and let you leave earnings in the company, deferring personal tax until you take the money out. Whether that helps depends on your income and your regulator's rules, which is a conversation for a qualified accountant who knows your profession.
Where Korporex fits
Korporex handles the incorporation filing itself. The professional regulator's approval is a separate, profession-specific step you arrange with your governing body, and the rules there are set by your regulator, not by Korporex.