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Professional Corporations: An Overview to Determine if a PC is Right for You
By Jessica A. Spataro
| Apr 9, 2020
If you are a member of a profession and you wish to incorporate your business, you may be able to incorporate as a professional corporation (a “PC”). This form of corporation is only available to regulated professions including, but not limited to, chartered accountants, lawyers, chiropractors, dieticians, optometrists, pharmacists, physicians, psychologists, social workers, and veterinarians.
PCs may only carry on the business of the profession and activities ancillary to this business. They must be certified by their governing body before carrying on business, and must renew their certification as required. PCs cannot operate under a number name, and must include “Professional Corporation” or “société professionnelle” in their name.
PCs are regulated by both provincial corporate statute and the profession’s governing body. For example, the provincial statute requires all shareholders in a PC to be members of the profession, and all directors and officers must be shareholders. However, the governing body for health professionals has granted an exception to this rule, which permits health professionals to issue non-voting shares to family members of the health practitioner. No other governing body has granted a similar exemption on share issuance, so the provincial statute restriction continues to apply to the other professions.
Advantages of a PC
- Limited liability for many matters, including debts, loans, and leases.
- You may be able to benefit from income splitting with family member(s) by paying them a salary as an employee of the business or for health professionals, paying a dividend on a family member(s)’ non-voting shares.
- Tax advantages similar to those associated with a regular corporation, such as paying tax at a lower corporate tax rate and benefiting from tax deductions.
Disadvantages of a PC
- Restrictions on who can be shareholders, directors, and officers.
- Shareholders have unlimited personal professional liability for themselves and all other shareholders.
- Ongoing oversight by the governing body.
- Tax disadvantages similar to those associated with a regular corporation, such as individuals cannot personally benefit from business losses.
PCs are highly regulated, and the rules vary from profession to profession. As a result, we recommend seeking legal and accounting advice on whether a PC is right for you.