Professional Corporation Requirements in Ontario

Professional Corporation Requirements in Ontario

Professionals opting to incorporate their practice must adhere to specific requirements that differ from those of standard business corporations. A professional corporation offers unique advantages but also comes with distinct regulatory obligations and limitations. This article provides an overview of the essential requirements for forming a professional corporation in Ontario.

What is a Professional Corporation?

A professional corporation is a type of corporate entity that offers professional services in fields which require professional licensing, 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 regulations vary depending on the profession, but they generally encompass certain common themes:

  1. Licensing Requirements: Each professional must hold a valid license from their respective regulatory body. For example, lawyers must be licensed by the Law Society of Ontario, while the College of Physicians and Surgeons of Ontario licenses physicians. The corporation itself may also need to be registered or recognized by the regulatory body.
  2. Naming Conventions: The name of the professional corporation typically must adhere to specific 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.
  3. 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 that the corporation remains controlled by individuals bound by the same professional and ethical standards.
  4. Professional Liability: Importantly, 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. Additionally, professional corporations are often required to carry a certain amount of liability insurance, as the governing body specifies.
  5. 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.
  6. Record-Keeping and Reporting Requirements: Professional corporations may be subject to additional record-keeping and reporting requirements, ensuring transparency and adherence to professional standards.
  7. Advertising and Marketing Restrictions: Many professional governing bodies have specific rules about how their members can advertise their services, which would extend to the corporation.
  8. 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 instance, 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 regulations that govern professional corporations in their respective fields.

Requirements for a Professional Corporation

Here are some of the items that are typically required for a Professional Corporation:

  1. Licensing and Regulatory Compliance:
    • Professionals must hold a valid license from their respective regulatory body (e.g., the Law Society of Ontario for lawyers).
    • The corporation must comply with the regulations of both the OBCA and the professional body.
  2. Name of the Corporation:
    • The corporation’s name often must include the professional’s name and a legal element like ‘Professional Corporation’ or its abbreviation.
    • It must adhere to the naming conventions set by the respective professional regulatory body.
  3. Shareholder Restrictions:
    • All shareholders must be members of the same profession.
    • This restriction ensures that the corporation remains under the control of licensed professionals.
  4. Director and Officer Requirements:
    • Typically, only licensed professionals can be directors and officers of the professional corporation.
    • This rule ensures that the professional standards of the relevant field bind those managing the corporation.
  5. Professional Liability:
    • Incorporating does not limit personal liability for professional malpractice. Professionals remain personally liable for their own actions and those they supervise.
    • It is mandatory to maintain professional liability insurance as per the standards set by the governing body.
  6. Corporate Practice of the Profession:
    • The corporation can only offer services within the profession for which it is licensed.
    • Engaging in business activities unrelated to the profession may be restricted or prohibited.

Certificate of Authorization

A Certificate of Authorization is a necessary certification that a professional regulatory body issues to professional corporations which operate in specific fields such as healthcare, engineering, law or accounting. It is an official recognition that the professional corporation complies with the regulatory standards and ethical guidelines set by the governing body of its respective profession. It verifies that all practicing members of the corporation are duly licensed and in good standing, and it authorizes the corporation to provide professional services. The certificate requires regular renewal and may specify conditions such as maintaining adequate professional liability insurance.

Summary

Forming a professional corporation in Ontario offers several advantages but requires adherence to specific legal and regulatory standards. It is essential for professionals to understand these requirements and consult with legal experts specializing in professional corporations to ensure compliance and optimize the benefits of incorporation.

If you are in search of 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.

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