Your Business Number is the root of all your tax accounts with CRA (for example, HST, payroll, corporate tax, import/export). Your Business Number and Corporate Income Tax Number are assigned automatically by Canada Revenue Agency (CRA) when you incorporate.
For Ontario Corporations, your Business Number will be sent by mail to the registered address of your corporation following incorporation. It will also be published in the Ontario Business Registry once it has been generated by CRA (usually 3-4 business days following incorporation). In order to access the Ontario Business Registry, you will need a Company Key, which is automatically generated upon incorporation. You will also need to create a Service Ontario ONe-Key Account. Click hereto download our guide to accessing the Ontario Business Registry.
For Federal Corporations, the Business Number is generated upon incorporation. You can also find the Business Number for your Federal corporation in Corporations Canada freely searchable database.
Other CRA Tax Accounts
You can contact CRA directly at 1-800-959-5525 to register for any other tax accounts you require, including HST, Payroll and/or Import/Export.
It is free to get these tax accounts. However, once you obtain these tax accounts, you will have certain ongoing filing requirements with CRA. You should speak with your accountant prior to registering for these CRA tax accounts to understand the filing obligations and to confirm what tax accounts you require.
You may also wish to consider creating an online My Business Accountwith CRA for your corporation.
Quick Tips for HST
When registering for an HST over the phone, the CRA agent may ask you the following questions:
Estimated annual income for the year. CRA wants to verify whether you are registering voluntarily or because you have reached the $30,000 threshold making it mandatory for you to register for HST.
Year end for HST Filings. If you have not discussed this with your accountant, you can request that CRA leaves the year end as the default year end – December 31st. Once declared, it may be more difficult to change.
How Often you want to file. Most people will start with annual filings. Once you reach a certain amount of revenue, you may be required to file more regularly.
An Ontario professional corporation is subject to conditions set out in the Ontario Business Corporations Act (the “OBCA”) and the rules and regulations mandated by the governing body of the applicable profession.
A professional corporation is subject to restrictions in the business it is permitted to carry on, the individuals who may be elected or appointed directors and/or officers of the corporation and the individuals who may own shares of the corporation. The professional corporation must also apply to its governing body for a Certificate of Authorization.
Restrictions and Requirements
Although each profession may have slightly different requirements, the following requirements will generally apply:
Name Restrictions
The name of a professional corporation is subject to strict naming conventions.
The OBCA requires that the name of the corporation include the words “Professional Corporation”.
Most governing bodies mandate that the name of the professional corporation must include the professional’s surname as it appears on file with the governing body; may include given names or initials, but does not have to; and must indicate the profession being practiced (i.e. law, medicine, dentistry).
Professionals wishing to operate their business under a different practice name will generally have to file a business name registration.
Jurisdiction
For professionals in Ontario, the professional corporation must be an Ontario corporation. Professional corporations cannot be incorporated federally.
Restrictions on Business
The OBCA mandates that a professional corporation can only carry on the practice of the specific profession, and requires that the following business restriction be set out in the articles of incorporation of the professional corporation:
“the corporation may not carry on a business other than the practice of the profession but this paragraph shall not be construed to prevent the corporation from carrying on activities related to or ancillary to the practice of the profession, including the investment of surplus funds earned by the corporation”
Restrictions on the Transfer/Ownership of shares
The OBCA requires that all of the issued and outstanding shares of the professional corporation be legally and beneficially owned, directly or indirectly, by one or more members of the profession. Doctors and Dentists are the exceptions to this rule. Doctors and Dentists are allowed to issue non-voting shares to family members (i.e. children, parents or spouses). Specific language is required to be included in the articles of incorporation to highlight this restriction.
Restrictions on Directors and Officers
All officers and directors of the professional corporation must be members of the specific profession and must also be shareholders of the professional corporation. Family members who are shareholders of dentistry or medicine professional corporations are not permitted to be officers or directors.
Holding Companies as Shareholders
Each governing body takes a different stance on whether holding companies can be shareholders of professional corporations. The Law Society of Ontario for example, permits holding companies to be shareholders of law professional corporations provided that the business of that holding corporation is restricted and the shareholders, directors and officers of the holding corporation are also lawyers. The College of Physicians and Surgeons of Ontario, on the other hand, does not permit holding companies to be shareholders of medicine professional corporations.
Obtaining a Certificate of Authorization
Once incorporated the professional must apply for a Certificate of Authorization directly through the applicable governing body. A professional is not permitted to practice their profession through a corporation until this certificate has been issued.
As part of the application, you will generally need to:
Provide information about the name of the Professional Corporation and the directors, officers and shareholders;
Provide information about the various practice addresses of the professional;
Upload a copy of the Certificate and Articles of Incorporation for the Professional Corporation;
Upload a recent Corporate Profile Report. This report must be ordered from the Ontario Ministry; and
Pay the applicable fee.
Renewing your Certificate of Authorization
The Certificate of Authorization must be renewed annually. The renewal date will vary depending on the governing body. The renewal process typically involves the following:
Completing the renewal application;
Uploading a current Corporate Profile Report; and
Paying the renewal fee.
What are the Advantages of a Professional Corporation?
There are many advantages to incorporating, a list of which you can find here. Some of the main advantages of incorporating a professional corporation are also listed below.
Tax Benefits
The main reason professionals incorporate is to take advantage of certain tax benefits. With a Professional Corporation, the professional can control the amount of personal income paid to them each year. Professionals will also be able to take advantage of certain tax benefits that are only available to Canadian Controlled Private Companies and their shareholders such as the small-business deduction and lifetime capital gains exemption.
Liability Protection
Unlike non-professional corporations, professionals are not able to shield their personal liability with respect to their professional obligations and professionals will still need to rely on their professional liability insurance to satisfy any claims related to professional misconduct. However, the professional corporation does provide liablity protection for non-professional obligations. For example, if the professional corporation is the tenant on a lease (and assuming no personal guarantees have been provided by the professional), the landlord would only be able to claim against the professional corporation, and not the professional personally, to cure a default for the non-payment of rent.
Growth
A Professional Corporation is capable of having many shareholders. This allows others to get involved, take an ownership interest and become invested in the success and continuation of the business.
Do I need a Section 85 Rollover?
If you have been practicing your profession as a sole proprietor and now wish to operate through a professional corporation, you may need to complete a section 85 rollover. The Section 85 rollover allows the transfer of the assets from a sole proprietorship to a corporation on a tax deferred basis. Accountants may recommend that professionals complete the rollover in connection with the goodwill of their business.
Physicians/Doctors in Ontario that wish to practice their profession through a corporation may only do so through an Ontario professional corporation. A Medicine Professional Corporation is simply a corporation that is subject to the conditions set out in the Ontario Business Corporations Act (the “OBCA”) and the rules and regulations mandated by the College of Physicians and Surgeons of Ontario (“CPSO”).
In addition to the rules and regulations which are summarized below, a major difference between professional and non-professional corporations is liability protection. A physician will not be able to limit or shield their personal liability with respect to professional obligations if they operate through a Medicine Professional Corporation. If there is a claim against the physician for professional misconduct, for example, the physician and the Medicine Professional Corporation would be jointly and severally liable to satisfy all professional liability claims and would rely on their professional liability insurance to satisfy such claims.
Medicine Corporations: Restrictions and Regulations
A Medicine Professional Corporation is subject to the following restrictions/regulations:
Jurisdiction
Physicians are not permitted to use a federal corporation for their professional corporation. For physicians licensed in Ontario, a professional corporation must be an Ontario corporation.
Name of Law Professional Corporation
A Medicine Professional Corporation is subject to strict naming conventions. The name of the corporation:
may include the physician’s given names or initials;
must include the professional’s surname as it appears on file with CPSO; and
must include the ending “Medicine Professional Corporation”.
Physicians wishing to advertise to the public under a different practice/clinic name, will have to file a separate business name registration (ie. obtain a Master Business License) and disclose this practice name to CPSO.
Articles of Incorporation
The Articles of Incorporation of the Medicine Professional Corporation must include certain restrictions:
Business Restriction
The Medicine Professional Corporation may not carry on a business other than the practice of medicine or activities which are ancillary to the practice of medicine, including the investment of surplus funds earned by the Medicine Professional Corporation.
Restrictions on the Transfer/Ownership of Shares
Each voting share of the Medicine Professional Corporation must be owned by a member of the College of Physicians and Surgeons of Ontario. Each non-voting share of the Medicine Professional Corporation may be owned by a family member of the physician. A family member only includes children, spouses and parents.
Directors and Officers
Only physicians who are also shareholders of the Medicine Professional Corporation can be directors and officers of the Medicine Professional Corporation.
Holding Companies
CPSO does not permit holding companies to own shares of a Medicine Professional Corporation at this time.
Obtaining a Certificate of Authorization
The application for a Certificate of Authorization is required to be filed online through the physicians’ member portal with CPSO.
As part of the application, the physician will need to:
Provide information about the name of the Medicine Professional Corporation and the directors, officers and shareholders.
Provide information about the various practice addresses of the physicians.
Upload a copy of the Certificate and Articles of Incorporation for the Medicine Professional Corporation;
Upload a recent Corporate Profile Report. This report must be ordered from the Ontario Ministry; and
Pay the applicable fee to CPSO. The current fee is $400, and this fee is paid directly to CPSO.
Renewing Your Certificate of Authorization
Medicine Professional Corporation must be renewed annually. As part of the renewal process you will need to do the following:
Complete the renewal application online by following the steps through your CPSO member portal
Upload a current Corporate Profile Report. Ordower Law can request this report for you; schedule a consultation below.
Pay the Renewal Fee of $175
What are the Advantages of a Professional Corporation for Medical Practices?
There are many advantages to incorporating in general, a list of which you can find here [our blog – top ten reasons to incorporate]. For professional corporations, the following are some of the main ones:
Tax Benefits
The main reason a physician will want to incorporate a Medicine Professional Corporation is for tax savings. By incorporating a Medicine Professional Corporation, physicians will be able to take advantage of the small-business deduction that is available on active business income for Canadian Controlled Private Corporations. By forming a Medicine Professional Corporation, physicians will also have the ability to leave behind a portion of their business income in the Medicine Professional Corporation and ultimately defer the payment of personal taxes on this income until the professional decides to pay themselves.
Liability Protection
Although physicians cannot limit personal responsibility with respect to professional obligations, the Medicine Professional Corporation does provide liability protection for non-professional obligations that are entered into by the professional corporation. For example, if the Medicine Professional Corporation is the tenant on a lease and no personal guarantee/indemnity is provided by the physician, the landlord would only be able to claim against the Medicine Professional Corporation in the event of a default under the lease.
Saleability
If you are looking to exit your business at some point, you’ll have more options when selling a corporation. You can sell the assets of the company or the shares. Buyers usually want to buy assets (as they get to depreciate them again at higher values) and sellers typically want to sell shares (as the lifetime capital gains exemption may be available). It’s not really possible to sell a sole proprietorship itself, although you can sell the assets you used (equipment, for example). Buyers examine factors such as profitability, net worth and market position when looking at your corporation. Keep in mind, anyone purchasing the shares of your corporation will have to be a Doctors!
Growth
A Medicine Professional Corporation is capable of having many shareholders so long as they are also dentists. This allows others to get involved, take an ownership interest and become invested in the future success of the business. It’s just a better way to combine resources and share the spoils. With a sole proprietorship, it’s just you. If you want your business to grow, it helps to have multiple perspectives and ideas and different people with a vested interest.
Do I Need a Section 85 Rollover?
Generally speaking, when you transfer assets from a sole proprietorship to a corporation you will trigger a tax event for the sole proprietor who would be deemed to have disposed of the assets of the sole proprietorship at its fair market value. The Section 85 rollover allows the transfer of the assets from a sole proprietorship to a corporation on a tax-deferred basis. Accountants will often recommend that physicians complete the transfer and file the joint election form in connection with their goodwill and other assets. Whether or not you require a rollover is a question for your accountant.
At Ordower Law, we can assist with your incorporation needs. Feel free to give us a call at 416-849-1900. You can also book a consultation with us below. If you would like us to assist with incorporating your professional corporation let us know and we can send you our standard retainer email.
Lawyers in Ontario that wish to practice their profession through a corporation may only do so through an Ontario Law Professional Corporation.
A Law Professional Corporation is simply a corporation that is subject to the conditions set out in the Ontario Business Corporations Act (the “OBCA”) and the rules and regulations mandated by the Law Society of Ontario (“LSO”). In addition to the rules and regulations which are summarized below, a major difference between professional and non-professional corporations is liability protection.
A lawyer will not be able to limit or shield their personal liability with respect to professional obligations if they operate through a Law Professional Corporation. If there is a claim against the lawyer for professional misconduct, for example, the lawyer and the Law Professional Corporation would be jointly and severally liable to satisfy all professional liability claims and would rely on their professional liability insurance to satisfy such claims.
Restrictions and Regulations
A Law Professional Corporation is subject to the following restrictions/regulations:
Jurisdiction
Lawyers are not permitted to use a federal corporation for their professional corporation. For lawyers licensed in Ontario, a professional corporation must be an Ontario corporation.
Name of Law Professional Corporation
A Law Professional Corporation is subject to strict naming conventions. The name of the corporation:
must adhere to the law firm name guidelines, which are currently found here and must include the ending “Professional Corporation”.
Articles of Incorporation
The Articles of Incorporation of the Law Professional Corporation must include certain restrictions:
Business Restriction in Article 5 of the Articles of Incorporation
The Law Professional Corporation may not carry on a business other than the practice of law or activities which are ancillary to the practice of law, including the investment of surplus funds earned by the Law Professional Corporation.
Restrictions on the Transfer/Ownership of shares in Article 8 of the Articles of Incorporation
All of the issued and outstanding shares of the Law Professional Corporation shall be legally and beneficially owned, directly or indirectly, by one or more lawyers.
All of the issued and outstanding shares of the Professional Corporation shall be legally and beneficially owned, directly or indirectly, by one or more persons who are licensed to practice law in Ontario (such person or persons being hereinafter individually and collectively referred to as a “shareholder”), but this paragraph shall not be construed to prevent such shares from being transferred to, or otherwise owned by the estate trustee (or by the estate trustees, if more than one) of any deceased shareholder in accordance with the Law Society Act R.S.O. 1990, c. L.8, or the Business Corporations Act R.S.O. 1990, c. B.16, for the purposes of administering the shareholder’s estate, but not for the practice of law.
Directors and Officers
Only lawyers who are also shareholders of the Law Professional Corporation can be directors and officers of the Law Professional Corporation.
Holding Companies
Holding companies are permitted to be shareholders of Law Professional Corporations so long as they comply with certain conditions as set out by the LSO. The directors/officers/shareholders of the holding company must be restricted to the relevant licensee(s). Shares in a holding company may not be owned by family members or non-licensees. In addition, the business activity of a holding company must be restricted to holding the shares of the professional corporation. Applicants who intend to use a holding company should submit their draft Articles of Incorporation for the holding company to the LSO for approval before incorporating to avoid costly amendments. Applicants should also inquire directly with the LSO about the process.
Obtaining a Certificate of Authorization
Once incorporated a lawyer must apply to LSO for a Certificate of Authorization. A lawyer is not permitted to practice their profession through a law professional corporation until this certificate has been issued. The Certificate of Authorization may be rejected if the corporation is not compliant with all the restrictions/regulations set out above. A form of the application can be found here.
As part of the application, the lawyer will need to:
Provide information about the name of the Law Professional Corporation and the directors, officers and shareholders.
Provide information about the various practice addresses of the lawyers.
Upload a copy of the Certificate and Articles of Incorporation for the Law Professional Corporation;
Pay the applicable fee to LSO. The current fee is $250.00 (plus HST) and this fee is paid directly to LSO through the Law Society Store at: https://store.lso.ca. Proof of payment (the receipt) must accompany the Application for a Certificate of Authorization.
Send the completed application for a Certificate of Authorization in an email to [email protected] along with the payment receipt and certificate and articles of incorporation attached.
Obtain LSO approval for the articles of incorporation for the holding company, if applicable.
Renewing your Certificate of Authorization
The Certificate of Authorization for a Law Professional Corporation must be renewed every year at any time after October 1 and prior to December 31. If the renewal fee is not submitted by December 31, a notice will be issued indicating that the Certificate of Authorization has expired and the professional corporation is no longer entitled to practice law, provide legal services, or both practice law and provide legal services in Ontario. As part of the renewal process the lawyer will need to do the following:
Complete the renewal application online through the LSO member portal at https://portal.lso.ca
Pay the Renewal Fee, which is currently $100.00 (plus HST).
Only shareholders of the professional corporation are permitted to pay the renewal fee.
Discontinuing your Certificate of Authorization
If a professional corporation has not or will not practice law or provide legal services, the professional corporation must apply for permission to surrender the Certificate of Authorization in compliance with section 10 of By-Law 7.
What are the advantages of a Professional Corporation?
Tax Benefits
The main reason a lawyer will want to incorporate a Law Professional Corporation is for tax savings. By incorporating a Law Professional Corporation, lawyers will be able to take advantage of the small-business deduction that is available on active business income for Canadian Controlled Private Corporations. By forming a Law Professional Corporation, lawyers will also have the ability to leave behind a portion of their business income in the Law Professional Corporation and ultimately defer the payment of personal taxes on this income until the professional decides to pay themselves.
Liability Protection
Although lawyers cannot limit personal responsibility with respect to professional obligations, the Law Professional Corporation does provide liability protection for non-professional obligations that are entered into by the professional corporation. For example, if the Law Professional Corporation is the tenant on a lease and no personal guarantee/indemnity is provided by the lawyer, the landlord would only be able to claim against the Law Professional Corporation in the event of a default under the lease.
Do I need a Section 85 Rollover? Transitioning from a Sole Proprietorship to a Professional Corporation (Rollovers)
Generally speaking, when a lawyer transfers assets from a sole proprietorship to a corporation they will trigger a tax event for the sole proprietor who would be deemed to have disposed of the assets of the sole proprietorship at its fair market value. The Section 85 rollover allows the transfer of the assets from a sole proprietorship to a corporation on a tax deferred basis. Accountants will often recommend that lawyers complete the transfer and file the joint election form in connection with their goodwill and other assets. Whether or not a lawyer will require a rollover is a question for their accountant.
At Ordower Law, we can assist with your incorporation needs. Feel free to give us a call at 416-849-1900. You can also book a call with us below.
When you decide to incorporate, one of the very first things you will need to decide is where you want your corporation to be incorporated.
In Canada you can incorporate provincially pursuant to the laws of the applicable province/territory where you are carrying on your business or you can incorporate federally pursuant to the laws of the federal government. For example, if you are carrying on business in Ontario, you can incorporate an Ontario corporation or you can incorporate a Federal corporation and file an Initial Return Extra-Provincial Domestic Corporation with Share with the Ontario Ministry of Government and Consumer Services. If you are operating your business in Nova Scotia, you can incorporate a Nova Scotia corporation or you can incorporate a Federal corporation and file the applicable form for your Federal corporation to operate in Nova Scotia.
Corporations incorporated outside of Canada can also register for an Extra-Provincial License in the province or territory they wish to carry on business in.
So, how do you decide whether to incorporate provincially or federally? In this article, we will outline the differences between incorporating an Ontario corporation and a Federal corporation to help you make the decision. And if after, reading this article, you still can’t decide, just flip a coin!
Governance and Filing
The Ontario Ministry of Government and Consumer Services oversees the creation of Ontario corporations and the compliance of Ontario corporations with the Ontario Business Corporations Act and its regulations. You can access information about your corporation and complete filings with the Ministry through the new Ontario Business Registry.
Corporations Canada oversees the creation of Federal corporations and compliance of Federal corporations with the Canada Business Corporations Act and its regulations. You can access information about your corporation and complete filings for your corporation through the Corporations Canada Online Filing Centre.
Every other province or territory has its own governing legislation related to the creation and compliance of corporations the creation of corporations. While each jurisdiction has different laws and different public registries, there are a number of similarities.
Certain information about your corporation (whether incorporated federally or provincially), including the registered address and names and address for service of directors) is public information.
With Federal corporations, this database of public information is freely searchable. An unintended consequence of Corporations Canada’s freely searchable database has been the publication of this information by certain third parties on their own websites, making the information searchable via independent search engines like Google.
For Ontario corporations, while certain information is public information, in order to obtain information on the registered address of the corporation or the names and addresses for service for each director and officer, you have to obtain a corporate profile report from the Ontario Ministry and there is a fee associated with obtaining this report. The paywall offers Ontario corporations some additional privacy.
Name Protection
In this category, Federal corporations win.
When you incorporate an Ontario corporation, the name of your company is protected in Ontario. This means that you may have a claim against another Ontario business that registers a name that is similar to your name after your business has been registered.
BEWARE: Ontario corporations with similar names won’t be prevented from registration. It is your responsibility to insist that the similarly named business change its name following its registration.
Federal corporations get broader name protection. When you incorporate a Federal corporation, you are reserving your name across all of the provinces and territories in Canada. If, for example, you register a Federal corporation, you could have a claim against someone who registers a similar name for their business in British Columbia. If you register an Ontario corporation, someone could register a business in British Columbia with a similar name.
BEWARE: It is more difficult to get your name through on a federal level because your NUANS report will be scrutinized by a Corporations Canada examiner before your corporation will be registered and a notice of deficiency will be sent to you if the examiner sees similar names in your NUANS report.
Where You Can Carry on Business
In this category, federal and provincial corporations are equal.
Carrying on business refers to where you are physically located carrying on your business – where you have a permanent business establishment, where your employees are located, where your office/restaurant/store is located, and where your business has an interest in real property.
If you incorporate an Ontario corporation you have the automatic right to carry on your business within Ontario. This does not restrict you from selling your goods or services across Canada or the world. If, for example, I am selling widgets from my house in Ontario, I will need an Ontario corporation or Federal corporation (and the Ontario extra-provincial registration) but I can sell my widgets to anyone in the world.
BEWARE: You may have to obtain other licenses for your Ontario business in order to legally carry on your particular business in Ontario. For example, if you wish to sell liquor at your restaurant business, you will need to have a liquor license from the AGCO.
Contrary to popular belief, incorporating a Federal corporation does not mean that you can carry on business in any province. Every Federal corporation that wishes to operate its business in a particular province or territory must file certain information with the applicable provincial or territorial government and pay applicable government fees if any. There is no fee to file the Initial Return Extra-Provincial in Ontario if your corporation was incorporated somewhere in Canada.
Both federal and Ontario corporations can register to carry on business in other provinces or territories by filing the applicable extra-provincial forms. With a Federal corporation, however, since your name is already reserved across Canada, you may not have to obtain a NUANS report as part of the extra-provincial filing. If an Ontario corporation wishes to carry on their business in British Columbia and the name is already registered there, the Ontario corporation will have to operate their business in British Columbia under a different name.
Time to Incorporate
In this category, Ontario corporations win.
When you submit your articles of incorporation for an Ontario corporation through the Ontario Business Registry, your corporation will be filed automatically, and the Certificate and Articles of Incorporation will be emailed to you within minutes.
With Federal corporations, an examiner will review the NUANS report before accepting your corporation for registration. Once your articles are submitted to Corporations Canada, it can take 3-4 business days to receive your Certificate and Articles of Incorporation. In addition, if the examiner notices an issue with your proposed name, they will send you a notice of deficiency and give you the opportunity to amend your proposed name or defend the proposed name of your corporation.
If you want a Federal corporation and are in a rush, Corporations Canada does offer an expedited service for an additional fee of $100. If you pay the expedited fee, your corporation will be registered within 1 business day (subject to any issues related to your proposed name).
In addition, with a Federal corporation, you will have to file the Form 2-Extra Provincial. This can be done with your application for a Federal corporation through Corporations Canada. The Ontario corporation number that is generated by the Ontario Ministry as part of this registration will usually be issued within 2 business days.
BEWARE: Obtaining the extra-provincial registration in other provinces can take longer and generally, additional fees will apply.
Costs of Incorporating
In this category there is no clear winner although Federal corporations are cheaper to start.
Ontario
Federal
Initial Government Filing Fee
$300
$200 (or $300 for expedited service)
NUANS Report (Govt Fee)
~$13 – $100
$13
Forms to effect changes to Directors/Officers/Registered Address
No Govt Fee
No Govt Fee
Annual Returns
No Govt Fee
$13
Extra-Provincial Registration for Ontario
N/A
No Govt Fee
Government Filing Fee and NUANS
The government filing fee for incorporating an Ontario corporation is $100 more than the filing fee for Federal corporations. In addition, obtaining an Ontario NUANS search is generally more expensive for an Ontario corporation as you will have to obtain this NUANS search from a lawyer or another third-party service provider who may charge additional fees.
Corporate Changes
When there are changes to the registered address of your corporation or directors or officers of the corporation (due to a resignation or subsequent appointment), certain filings need to be completed and can be completed through the Ontario Business Registry or Corporations Canada Online Filing Centre. For Ontario and Federal corporations, there is currently no government fee associated with these specific filings.
BEWARE: Filing the forms as mentioned above is not sufficient to properly paper the changes. Formal resignations, resolutions of the directors or shareholders of the corporation and updates to the registers and ledgers of your corporation should also be prepared and inserted into your corporate minute book.
Annual Returns
In addition, every year both federal and Ontario corporations have to file an annual return (which is different than filing a corporate tax return) with the applicable ministry. With Federal corporations, the fee to file an annual return is $12.00. For Ontario corporations, there is no government filing fee.
Extra-Provincial
If either a Federal corporation or Ontario corporation wishes to carry on business in another province or territory, they will have to file the applicable form with the governing jurisdiction and pay the applicable fees. A Federal corporation may end up paying slightly less in connection with these registrations since they may not be required to obtain a NUANS report.
Professional Corporations: Restrictions on Jurisdiction of Incorporation
When choosing which jurisdiction for your corporation, it is important to note that you may not have a choice. Regulated professionals wishing to operate their business through a corporation must do so through a professional corporation. By law, Ontario professionals must incorporate an Ontario corporation and may not incorporate federally. Similarly, real estate professionals wishing to operate through a personal real estate corporation may only incorporate Ontario corporations.
Residency Requirements
For Federal corporations, at least 25% of the directors of the corporation must be resident Canadians. Resident Canadian means an individual who is a Canadian citizen or permanent resident who is ordinarily resident in Canada. However, a permanent resident will not qualify here if more than one year has passed since the time that he/she/they became eligible to apply for Canadian citizenship. Note that there is no requirement for any of the shareholders of the corporation to be resident Canadian, although different tax rates may apply for a non-Canadian-controlled corporation.
For Ontario corporations, there are no residency requirements for directors.
Transferability
If you are currently living in Ontario but think you may move to another province to carry on your business, you may wish to start with a Federal corporation because Federal corporations are slightly more transportable. As mentioned above, with a Federal corporation, your name is already reserved across Canada. To begin operating in another province, you can simply change the registered office of your corporation to the address where you move and file the applicable extra-provincial registration.
What should I consider when deciding which jurisdiction I want to incorporate within?
There are many different things you will need to consider when incorporating your business. Some questions you may want to think about are:
Where do you plan on conducting business with your corporation?
How much protection do you want for your business name?
Do you plan on just working provincially? Or are you hoping to carry on business in more than one province or territory?
What plans and goals do I have for this corporation?
There is a lot more to think about when it comes to deciding which jurisdiction works best for your corporation. It is important to ask questions to ensure that you are making the right decision for yourself and your corporation before submitting any applications.
At Ordower Law, we can assist with your incorporation needs. Feel free to give us a call at 416-849-1900. You can also book a call with us below.
If you are a dentist in Ontario that wishes to practice through a corporation, you may only do so through an Ontario professional corporation. A Dentistry Professional Corporation is simply a corporation that is subject to the conditions set out in the Ontario Business Corporations Act (the “OBCA”) and the rules and regulations mandated by the Royal College of Dental Surgeons of Ontario (“RCDSO”).
In addition to the rules and regulations which are summarized below, a major difference between professional and non-professional corporations is liability protection. You will not be able to limit or shield their personal liability with respect to professional obligations if you operate through a Dentistry Professional Corporation. If there is a claim against you, for professional misconduct for example, you and the Dentistry Professional Corporation would be jointly and severally liable to satisfy all professional liability claims and you would rely on your professional liability insurance to satisfy such claims.
Restrictions and Regulations
A Dentistry Professional Corporation is subject to the following restrictions/regulations:
Jurisdiction. For Dentists licensed by the RCDSO, Dentistry Professional Corporations must be Ontario corporations. You are not permitted to use a federal corporation for their professional corporation.
Name of Dentistry Professional Corporation. A Dentistry Professional Corporation is subject to strict naming conventions. The name of the corporation:
may include your given names or initials (optional);
must include your surname as it appears on file with RCDSO; and
must end with “Dentistry Professional Corporation”.
If you wish to advertise to the public under a different practice/clinic name (ie. Bright & Happy Smile Dental Clinic), you will have to file a separate business name registration (ie. obtain a Master Business License) and disclose this practice name to RCDSO.
Articles of Incorporation. The Articles of Incorporation of the Dentistry Professional Corporation must provide:
Business Restriction. The Dentistry Professional Corporation may not carry on a business other than the practice of Dentistry or activities which are ancillary to the practice of Dentistry, including the investment of surplus funds earned by the Dentistry Professional Corporation.
Restrictions on the Transfer/Ownership of shares. Each voting share of the Dentistry Professional Corporation must be owned by a member of the RCDSO. Each non-voting share of the Dentistry Professional Corporation may be owned by children, spouses and parents of the dentist.
Directors and Officers. Only dentists who are also shareholders of the Dentistry Professional Corporation can be directors and officers of the Dentistry Professional Corporation.
Obtaining a Certificate of Authorization. Once incorporated you must apply to your governing body (ie. RCDSO) for a Certificate of Authorization. You are not permitted to practice dentistry through a corporation until this certificate has been issued. The Certificate of Authorization application may be rejected if the corporation is not compliant with all the restrictions/regulations set out above.
As part of the application, you will need to:
Provide information about the name of the Dentistry Professional Corporation and the directors, officers, and shareholders.
Provide information about the various practice addresses of the dentist.
Upload a copy of the Certificate and Articles of Incorporation for the Dentistry Professional Corporation;
Upload a recent Corporate Profile Report. This report must be ordered from the Ontario Ministry; and
Pay the applicable fee to RCDSO. The current fee is $750 (subject to change) and this fee is paid directly to RCDSO.
Renewing your Certificate of Authorization. Your Certificate of Authorization for your Dentistry Professional Corporation expires on August 31st each year, regardless of the date of issuance. It must be renewed annually. If the certificate of authorization is not renewed before August 31, it will be revoked effective September 1 for failure to comply with renewal requirements. You may benefit from the lower renewal fee if you apply prior to August 2nd (as of 2022).
IMPORTANT: If you incorporate your company on June 1st and apply for a Certificate of Authorization right away, you will still have to apply for the renewal by August 31st in order to avoid revocation of the Certificate. When submitting your initial application, you may request that your Certificate of Authorization be issued after September 1st, however, you will not be able to practice dentistry through your Dentistry Professional Corporation until the Certificate of Authorization has been issued.
As part of the renewal process you will need to do the following:
Complete the renewal application online through your RCDSO member portal
Upload a current Corporate Profile Report. Ordower Law can order the report for you; contact us if you would like to retain our services.
Pay the Renewal Fee, which is currently $175-$200 for 2022
Change of Shareholders for your Dentist Professional Corporation. You are required to notify the College when there are changes to your corporation’s shareholders. Download the Notice of Change of Shareholders Form and Declaration and send the completed forms to the College.
Should I Incorporate a Dental Professional Corporation?
There are many advantages to incorporating in general, a list of which you can find here [our blog – top ten reasons to incorporate]. For professional corporations, the following are some of the main ones:
Tax Benefits. The main reason a Dentist will want to incorporate a Dentistry Professional Corporation is for tax savings. By incorporating a Dentistry Professional Corporation, dentists will be able to take advantage of the small-business deduction that is available on active business income for Canadian Controlled Private Corporations. By forming a Dentistry Professional Corporation, dentists will also have the ability to leave behind a portion of their business income in the Dentistry Professional Corporation and ultimately defer the payment of personal taxes on this income until the professional decides to pay themselves.
Liability Protection. Although dentists cannot limit personal responsibility with respect to professional obligations, the Dentistry Professional Corporation does provide liability protection for non-professional obligations that are entered into by the professional corporation. For example, if the Dentistry Professional Corporation is the tenant on a lease and no personal guarantee/indemnity is provided by the dentist, the landlord would only be able to claim against the Dentistry Professional Corporation in the event of a default under the lease.
Saleability. If you are looking to exit your business at some point, you’ll have more options when selling a corporation. You can sell the assets of the company or the shares. Buyers usually want to buy assets (as they get to depreciate them again at higher values) and sellers typically want to sell shares (as the lifetime capital gains exemption may be available). It’s not really possible to sell a sole proprietorship itself, although you can sell the assets you used (equipment, for example). Buyers examine factors such as profitability, net worth, and market position when looking at your corporation. Keep in mind, anyone purchasing the shares of your corporation will have to be a Dentist!
Growth. A Dentistry Professional Corporation is capable of having many shareholders so long as they are also dentists. This allows others to get involved, take an ownership interest and become invested in the future success of the business. It’s just a better way to combine resources and share the spoils. With a sole proprietorship, it’s just you. If you want your business to grow, it helps to have multiple perspectives and ideas and different people with a vested interest.
Do I need a Section 85 Rollover? Transitioning from a Sole Proprietorship to a Professional Corporation (Rollovers)
Generally speaking, when you transfer assets from a sole proprietorship to a corporation you will trigger a tax event for the sole proprietor who would be deemed to have disposed of the assets of the sole proprietorship at its fair market value. The Section 85 rollover essentially allows the transfer of the assets from a corporation on a tax-deferred basis. Accountants will often recommend that dentists complete the transfer and file the joint election form in connection with their goodwill and other assets.
Whether or not you require a rollover is a question for your accountant.
Have questions about incorporating? Ordower Law is here to help. Schedule a consultation with us below.
