Choosing the right business structure is one of the most important decisions a professional like you can make. Whether you’re a doctor, dentist, lawyer, chiropractor, accountant, or another regulated professional, the business structure you choose will impact everything about your business – from your taxes, operations, professional obligations, and long-term planning.
A great option available to many regulated professionals is a Professional Corporation.
At KD Professional Services, we often help professionals determine whether incorporating their practice through a Professional Corporation is the best move. While a Professional Corporation can offer many unique advantages, it also comes with specific rules that may not apply to a traditional corporations.
Let’s explore what a Professional Corporation is and whether it may be the best fit for your practice.
What Is a Professional Corporation?
A Professional Corporation is a corporation established by a member of a regulated profession. Unlike a standard corporation, a Professional Corporation is specifically designed for individuals who provide professional services and hold a professional designation or license. Professionals such as medical doctors, dentists, lawyers and accountants may operate a Professional Corporation.
It is important to note that each professional is governed by a regulatory body which establishes the rules around operating a Professional Corporation.
Advantages of a Professional Corporation
1. Professional Recognition
Professional Corporation reinforces your status as a licensed professional within your industry.
2. Membership in Professional Organizations
Many regulated professions require members to maintain active licensing and membership with their governing bodies.
3. Enhanced Business Structure
Professional Corporations provide a more formal business structure that supports long-term growth, practice management, and strategic planning.
Disadvantages of a Professional Corporation
1. Ownership Restrictions
Professional Corporations have restrictions on who may own shares. The profession and provincial rules and restrictions may be required that shareholders have the same professional designation.
2. Activities Must Be Limited to the Profession
A Professional Corporation generally restrict the corporation’s activities to the practice of the profession.
3. Increased Compliance Requirements
Professional Corporations are subject to both corporate filing requirements and professional regulatory requirements which result in more administrative obligations than a traditional corporation.
4. Additional Tax and Reporting Rules
Professional Corporation can be subject to more complex tax filing and reporting requirements than a standard corporation.
5. Continuity Challenges
Generally, the existence of a Professional Corporation depends on maintaining the required professional designation.
Is a Professional Corporation Right for You?
A Professional Corporation may be a good option for you if:
- You are a regulated professional who is authorized to establish and operate a Professional Corporation.
- You want a structured business structure for your practice.
- You are committed to maintaining professional licensing requirements.
It is important to note that every situation is unique and your decision to establish a Professional Corporation must be considered carefully with the help of professionals.
How KD Professional Services Can Help
KD Professional Services work with professionals across many industries to help them navigate the complexities of Professional Corporations.
We help ensure that your corporate structure supports both your professional goals and your financial objectives.
Contact KD Professional Services today to discuss whether a Professional Corporation is the right structure for your practice and your long-term business goals.
You can also check out our Corporate Services page to learn more about our accounting and tax services for business owners like you: https://kdprofessional.ca/services/corporate-services/