There are special types of corporations for professionals and for certain types of consultants.
If you’re a professional such as a lawyer, accountant, doctor, dentist, etc., you may be permitted to carry on your practice through what is called a professional corporation. This form of corporation has special requirements that are different for each profession. However, one general characteristic is that unlike most other corporations, professional corporations do not limit professional liability.
By way of example, we’ll look at professional corporations for lawyers. The general procedure is similar for other professions as well.
Professional Corporation for Lawyers
Under the Law Society Act, one or more persons who are licensed to practise law in Ontario as lawyers may establish a professional corporation for the purpose of practising law in Ontario. Anyone wishing to form a professional corporation must incorporate under the Ontario Business Corporations Act. After incorporation, the corporation must apply to the Law Society for a Certificate of Authorization. Without this Certificate, the corporation is not permitted to practise. In order to obtain and maintain such a certificate, the corporation must comply with the Law Society By-laws and Rules of Conduct.
Amongst other requirements, the Articles of Incorporation must include approved clauses restricting the business of the professional corporation and restricting the issuance of shares.The Law Society strongly encourages applicants to seek appropriate professional advice with respect to establishing a professional corporation suited to their specific circumstances.
Personal Service Corporations
A personal services corporation is defined by The Canada Revenue Agency (CRA) as “a business that a corporation carries on to provide services to another entity (such as a person or a partnership) that an officer or employee of that entity would usually perform. Instead, an individual performs the services on behalf of the corporation. That individual is called an incorporated employee.”
A personal services corporation is taxed less favorably than normal corporations. If you think you might fit this definition, it’s best to get some expert advice, preferably from a good tax accountant.