Professionals governed by an order (physicians, accountants, engineers and others) may incorporate if their regulation allows it. The tax advantages are real, but professional liability stays personal. Complete package at $1,545.60 all in.
Physicians, dentists, accountants, engineers, health or legal professionals: most members of a Québec professional order may now practise within a corporation. The tax advantages are real, but the path is marked out by rules an ordinary incorporation ignores entirely. Here is what sets professional incorporation apart, and why it cannot be improvised.
A privilege framed by your order
The Professional Code allows practice within a corporation, but leaves it to each order to set the conditions by regulation. The result: the rules vary from one profession to the next. Each order specifies who may hold the voting shares, who may sit on the board of directors, what professional liability insurance must be maintained and what declaration must be sent to it. Before any incorporation, the first step is therefore always the same: read your order’s regulation, and build the corporation around its requirements.
Share ownership and a name under watch
In most cases, control of the corporation must remain in the hands of members of the order: the voting shares are reserved to them, and family members or family holding corporations may hold, at best, only non-voting shares, according to what the regulation allows. The corporation’s name too obeys particular rules: it must generally reflect the practice of the profession and respect the framework set by the order, which rules out many creative names permitted to ordinary corporations.
What incorporating does not change
A capital point: the corporation is not a shield against your professional liability. You remain personally liable for your professional faults toward your clients and patients, and your liability insurance continues to play that protective role. What the corporation protects is the rest: it separates the business patrimony from your personal patrimony for ordinary commercial debts, such as the lease, the equipment or the suppliers.
The benefit, then? Essentially a tax one
Practising within a corporation lets you leave in the corporation the income you do not consume, taxed at the small-business rate rather than at the upper brackets of personal tax. That deferral frees up cash to invest, to pay down faster or to build a cushion. To this are added planning possibilities, such as the choice between salary and dividends, to be orchestrated with your accountant. For a professional whose income comfortably exceeds the cost of living, the recurring saving amply justifies the structure.
An incorporation that calls for method
In practice, a successful professional incorporation runs through the analysis of your order’s regulation, the drafting of articles whose classes of shares respect the restrictions, the complete legal organization with a minute book, then the declaration to or authorization from the order before you begin practising within the corporation. Each order having its own forms and timelines, this path has to be planned. That is exactly the scope of our professional incorporation package, designed so that your corporation is compliant from day one, in the eyes of the registrar as much as of your order.
The mistake that makes you start over
This is the file we take over most often, and it is entirely avoidable.
A professional has an ordinary business corporation constituted, quickly and cheaply. The articles are valid, the certificate is issued, the business number is assigned: everything looks in order. Then comes the moment of declaring the practice within a corporation to their professional order, and the file is refused because the structure does not comply with the applicable regulation: unsuitable classes of shares, voting shares held by someone who is not a member of the order, a board composition that does not conform, or a name that does not meet the profession’s requirements.
The registrar is not the guardian of your ethical obligations. Its examination bears on the compliance of the application for constitution, not on your order’s regulation. A corporation ill-suited to professional practice can therefore be accepted without difficulty. The problem only appears afterward, on the order’s side, when everything is already in place.
The correction is no small thing. The articles must be amended, the legal organization redone, the shares reissued and sometimes decisions already recorded taken again, with new government fees and new professional fees. In practice, you pay twice, and the second time costs more than if the work had been done properly at the outset, because you have to undo before redoing. Add to that the delay, during which you cannot bill through the corporation.
The lesson fits in one sentence: for a professional governed by an order, constituting a corporation is not an administrative formality, it is a compliance exercise. It is built from your order’s regulation, not from a generic template. Have it done by someone who knows those regulations, and you will do it only once.
Insurance and the obligations toward the order
Practising within a corporation is not limited to constituting the legal person: it comes with continuing obligations toward your order, and it is on their side that most of the lapses we see are found.
Depending on the applicable regulation, you will generally have to declare to your order that you practise within a corporation, provide information on the share ownership and the directors, and maintain the required professional liability coverage, whose amount or form may differ where practice is within a corporation. These obligations are recurring: a change of shareholder, the arrival of a partner or a modification of the structure must normally be reported within the prescribed time.
The risk is not only administrative. A failure to comply can expose you to a disciplinary sanction, which is of a different nature than a penalty in the register. That is why your order’s regulation must be consulted in the version in force before every change of structure, and not once only at incorporation.
What happens if you lose the right to practise
A scenario no one likes to contemplate, and which must nonetheless be provided for: temporary striking off the roll, suspension, limitation of the right to practise, early retirement for health reasons, death. Since control of the corporation must remain in the hands of members in good standing of the order, the situation of the shareholder who ceases to be one has to be settled, and often within a tight time frame.
With no mechanism provided in advance, you find yourself negotiating the buy-back of the shares in a hurry, with a person in difficulty and sometimes with their estate. That is exactly what a shareholder agreement is made to avoid: it defines the events that trigger the buy-back, the valuation method, the terms of payment and the funding, often by insurance. For a professional corporation, that agreement is not an added comfort, it is a piece of compliance.
Practising together: three configurations to tell apart
Professionals who work together regularly confuse three very different arrangements.
Expense sharing consists in gathering under one roof and pooling the rent, the reception and the equipment, each keeping their own clientele and their own corporation. The pooling is settled by contract, without anyone becoming anyone else’s partner.
The common corporation assumes the fees come into a single entity, of which the professionals are shareholders. It is a true association, with the usual questions of sharing, governance and departure, and with the share ownership restrictions particular to your order.
The mixed structure, finally, has a common entity and individual corporations live side by side. It is frequent and perfectly viable, provided the flows between entities are documented and each respects the applicable rules.
The choice has effects on liability, on taxation and on what happens the day someone leaves. It deserves to be made deliberately, not by an accumulation of decisions taken over the years.
The three ways professionals work together, and what distinguishes them legally.
| Expense sharing | Common corporation | Mixed structure | |
|---|---|---|---|
| Clientèle | Own to each | Common to the corporation | Own, with a service entity |
| Honoraires | Billed by each | Collected by the corporation | Billed by each corporation |
| What is pooled | Rent, staff, equipment | The whole operation | The means, not the revenue |
| Legal link between members | Sharing contract | Actionnariat | Contract and share ownership of the common entity |
| Departure of a member | Termination of the contract | Buy-back of the shares | Withdrawal from the common entity |
| Essential document | Expense-sharing agreement | Shareholder agreement | Both |
| Complexité | Faible | Moyenne | Élevée |
Each order has its own share ownership rules. We build the structure around your regulation.
A reminder about the reach of the protection
We said it above, and it is worth coming back to because it is the most frequently disappointed expectation: the corporation is no screen against your personal liability for your professional acts. What it brings belongs to taxation and to the separation of ordinary commercial debts. If your primary motivation is to protect yourself against a claim tied to your practice, it is your insurance coverage and the quality of your files you should examine, not your corporate structure.
Frequently asked questions
Can every professional practise within a corporation in Québec?
Most can, but each professional order sets its own conditions by regulation: who may hold the voting shares, who may sit on the board, what insurance to maintain and what declaration to send. The first step is always to read your order’s regulation.
Does incorporating protect against a professional fault?
No. You remain personally liable for your professional faults toward your clients or patients, and it is your liability insurance that plays that role. The corporation separates the business patrimony from the personal patrimony for ordinary commercial debts.
What happens if my ordinary corporation does not comply with my order?
The registrar can accept a constitution that does not comply with your order’s regulation, since it is not its guardian. The refusal comes afterward, on the order’s side, and the correction means amending the articles, redoing the legal organization and paying new fees.