Certain professionals including, lawyers, doctors, dentists, accountants and chiropractors, are not allowed to operate their practice through a corporation. This is because they are personal liable for professional negligence claims. The limited liability feature of corporations would prevent these lawsuits from being successful. As such, this form of business has not been allowed for these professions. Historically these professionals only operated as a partnership or a sole proprietor.
These days, a special type of corporation called a Professional Corporation, or PC exists. These corporations allow these professionals to receive the same tax advantages a corporation provides, but without the limited liability. The relevant governing body approves the creation of these corporations. All the other steps in incorporating a PC are the same as other corporations. The articles of these corporation have specific terms required by the regulating body. For example, the directors have to be active members of the Society or College, and all voting shares have to be owned by a member as well. This means that if your spouse works in a different field will not be able to own an equal share of your company.
When you retire, or if you sell your practice, you can keep the same corporation. However, you will need to amend the articles to change it back to a ‘regular’ corporation.
As a rule, if you are in one of these industries, you are familiar with the term PC or Professional Corporation. If you are not sure if your business needs to operate through a PC, it probably doesn’t. Still not sure if you need a regular corporation or professional corporation? Give us a call and set up an appointment with one of our lawyers today!