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smart tax planning ... improves your bottom line!Incorporating Your Business
Formation & Operation
A professional corporation resembles a business corporation, requiring compliance with corporate law and the rules and regulations of professional licensing bodies. A professional corporation is formed in the same manner as a business corporation, except that it typically has one or several of the following additional limitations, depending on the jurisdiction:
- All shares of stock of the corporation (or a minimum percentage) must be owned and held by individuals licensed in the profession of the corporation.
- At least one incorporator must be licensed in the profession.
- At least one director (or a majority, or even exclusively) must be licensed in the profession.
- The articles of incorporation, in addition to all other requirements, must limit the activities of the corporation to the profession.
- The professional corporation may be required to obtain from the appropriate professional body a certification that the shares of stock are owned by individuals who are duly licensed in the profession.
- Professional corporations are typically required to use the name of the professional as part of the corporate name. They are also required to have the words "Professional Corporation" as part of its legal name.
Period of Existence
A professional corporation has a less stable business life than a business corporation due to the dependence on its members. For example: The death or disqualification of a shareholder or employee may result in the dissolution of the corporation.
Quick Facts
The professional corporation may not carry on a business other than the practice of the profession; however, this shall not be construed to prevent the corporation from carrying on activities that are related to, or ancillary to, the practice of the profession, including the temporary investment of surplus funds earned by the corporation.
In general, incorporating protects shareholders in their personal capacities from corporate liability. The professional corporation provisions ensure that personal professional liability of those professionals who choose to operate their practices through a professional corporation will not be limited.
The name of the professional corporation must include the words "Professional Corporation" or "Société Professionnelle" and cannot be a number name.
The professional incorporation legislation allows one or more members of the same profession to be shareholders in a professional corporation. All officers and directors of the professional corporation are required to be shareholders of the corporation.
The governing bodies of regulated professions will be responsible for the certification or licensing of professional corporations that fall under their jurisdiction. In addition, the governing bodies will be able to "look through" professional corporations and hold the professional shareholders accountable for their actions.
Client Comments
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