Dental Professional Incorporation in Ontario

September 5, 2022 | By Jana Lambert

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In this article:
  1. Introduction
  2. Restrictions and Regulations
  3. Do I Need a Section 85 Rollover?

Jana Lambert

Jana Lambert

Introduction

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:

  1. 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.
  1. 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. 

  1. 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.
  • Email your complete application to [email protected]
  • Further details may be found here: Instructions and Checklist.
  1. 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
  1. 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.

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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:

  1. 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.
  1. 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. 
  1. 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!
  1. 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.

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