Professional Corporations – Incorporation Considerations

Commercial liability is limited but professional liability is not limited

  • Incorporating protects you from normal commercial liability against creditors but not from professional (i.e. malpractice) liability.  Each act of the professional corporation is deemed to be an act of the professional and the professional is jointly and severally liable with the professional corporation in respect of any liability which may flow from errors and omissions of the professional.
  • Professional governing bodies are able to look through corporations and hold the individual professional accountable for their actions.

Ownership by professionals and family members

  • One or more members of the same profession may, directly or indirectly, be shareholders of the professional corporation.
  • Family members that are members of the same profession may hold voting shares.  However, many Ontario medical practice partnerships and associations require that all voting shares of the corporation be held by the partner or associate of such medical practice partnership or association.
  • Family members that are not members of the of the same profession (doctors and dentists only) may hold non-voting shares of the corporation.
  • Non-professionals cannot control corporation through voting or other types of agreements.
  • Holding companies may not own shares in medicine professional corporations, and (doctors and dentists only) trusts may not own shares for any family member other than for children who are minors.

Even if both spouses are professionals, one professional corporation may not be an option

  • Most medical practice partnership and association agreements require all voting shares of the medical professional corporation to be owned by partners or associates, as applicable.   Spouses may use the same professional corporation only if they are both members of the same partnership or association or if one the professionals practices outside of a partnership or association.  The professional spouse that is not a member of the partnership or association will only be able to hold non-voting shares of the corporation and such spouse may not be a director of the corporation.

Management of the the corporation

  • All officers and directors of the professional corporation are required to be shareholders of the corporation.

Business activities of the professional corporation

  • The business of the corporation is restricted to the practice of the profession and activities that are related to, or ancillary to, the practice of the profession, including the temporary investment of surplus funds earned by the corporation.

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