If you want to incorporate your professional practice, you must meet requirements different from those of a standard business corporation. A professional corporation offers advantages but also has regulatory requirements and restrictions. This article will outline the key requirements to form a professional corporation in Ontario.
What is a Professional Corporation?
A professional corporation is a type of corporation that provides professional services in fields that require professional licenses such as law, medicine, dentistry, accounting and engineering. Unlike a regular corporation, a professional corporation is governed not only by the Ontario Business Corporations Act (OBCA) but also by the regulations of the relevant professional governing body. The governing body enforces these regulations to ensure compliance with the laws and regulations.
Professional Corporation Requirements in Ontario
In Ontario, a professional corporation must meet the requirements of the Ontario Business Corporations Act (OBCA) and the governing body of the profession. The corporation must have “Professional Corporation” or an abbreviation in its name, and all shareholders, directors, and officers must generally be members of the same regulated profession. The articles of incorporation must contain restrictions to limit the corporation to providing services of the profession and ancillary services. A certificate of authorization from the governing body is usually required to operate. Ongoing compliance with both corporate and professional requirements is required to maintain the corporation.
What is a Regulating Body of a Professional Corporation?
A governing body of a professional corporation is an organization that oversees and regulates the professionals in a particular field to ensure they follow the standards of practice, ethics and competence. These bodies are created by legislation and play a significant role in protecting the public interest by enforcing rules, issuing licenses and handling complaints or disciplinary actions. They also provide guidance and resources to help professionals stay compliant and improve their skills.
What are the typical requirements of the regulating body?
The regulations vary by profession but generally include:
- Licensing Requirements: Each professional must have a valid license from their respective regulatory body. For example, lawyers must be licensed by the Law Society of Ontario, physicians by the College of Physicians and Surgeons of Ontario. The corporation itself may also need to be registered or recognized by the regulatory body.
- Naming Conventions: The name of the professional corporation must meet the guidelines set by the governing body. This often includes the requirement to use the professional’s name and may include a designation such as “Professional Corporation” or a related abbreviation. The name may also need approval from the regulatory body to ensure it meets professional standards.
- Restrictions on Shareholders, Directors, and Officers: Generally, shareholders, directors and officers of a professional corporation must be licensed members of the same profession. This ensures the corporation is controlled by individuals bound by the same professional and ethical standards.
- Professional Liability: Professionals cannot use the corporate structure to limit their personal liability for professional malpractice. Members of the profession remain personally liable for the services they provide. Also, professional corporations are often required to carry a certain amount of liability insurance as specified by the governing body.
- Scope of Practice: Professional corporations are typically restricted to practicing only in their field of professional expertise. Engaging in business activities outside the scope of the profession may be limited or prohibited.
- Record-Keeping and Reporting Requirements: Professional corporations may be subject to additional record-keeping and reporting requirements to ensure transparency and adherence to professional standards.
- Advertising and Marketing Restrictions: Many professional governing bodies have rules on how their members can advertise their services which would apply to the corporation.
- Ethical and Professional Standards: All members of the corporation are expected to adhere to the ethical and professional standards set by their governing body. This includes maintaining client confidentiality, avoiding conflicts of interest, and upholding the integrity of the profession.
For example, the College of Physicians and Surgeons of Ontario (CPSO) for doctors, the Law Society of Ontario for lawyers and the Chartered Professional Accountants of Ontario (CPA Ontario) for accountants each have their own set of rules for professional corporations in their respective fields.
Certificate of Authorization
A Certificate of Authorization is a document issued by a regulatory body that allows a professional corporation to practice in a regulated profession. In Ontario, it is required for professions such as law, medicine, engineering and accounting. It confirms the corporation meets the specific rules and standards of the governing body, including shareholder eligibility, name requirements and professional conduct. The Certificate of Authorization must be obtained before the corporation starts operating. It is renewable and subject to ongoing regulatory requirements.
Ongoing Obligations
As a professional corporation, you will have ongoing requirements from both your governing body and the government. These are important to keep your corporation in good standing and include:
- Renewing your approval with the governing body
- Filing annual reports with the government
- Maintaining professional liability insurance as required by your governing body
- Following the rules and regulations of your governing body
You must also ensure your professional corporation is in good standing with both the government and governing body at all times. This may mean updating your articles of incorporation, changing your business address, renewing your certificate of authorization or updating shareholder and director information as needed.
If you don’t comply with these ongoing requirements, you may face penalties and fines, or your approval to operate as a professional corporation may be revoked.
Summary
Professional corporations in Ontario must adhere to specific requirements set by the Ontario Business Corporations Act and the relevant regulatory body governing the profession. At Insight Law Professional Corporation, we provide legal guidance to help professionals establish and maintain their professional corporations in Ontario. From navigating regulatory requirements to obtaining your Certificate of Authorization, our team ensures the process is tailored to your profession’s needs.
If you are searching for guidance from a Toronto Incorporation Lawyer, contact us and see how our firm can help you.
The information provided above is of a general nature and should not be considered legal advice. Every transaction or circumstance is unique, and obtaining specific legal advice is necessary to address your particular requirements. Therefore, if you have any legal questions, it is recommended that you consult with a lawyer.
