Incorporating A CPA Professional Corporation in Ontario
Chartered Professional Accountants in Ontario who wish to practice their profession through a corporation may only do so through a Professional Corporation.
A CPA 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 CPA Ontario (“CPA”).
In addition to the rules and regulations which are summarized below, a major difference between professional and non-professional corporations is liability protection. A Chartered Professional Accountant will not be able to limit or shield their personal liability with respect to professional obligations if they operate through a CPA Professional Corporation. If there is a claim against the Chartered Professional Accountant for professional misconduct, for example, the Chartered Professional Accountant and the CPA 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/Regulations
A CPA Professional Corporation is subject to the following restrictions/regulations:
- Jurisdiction. Chartered Professional Accountants are not permitted to use a federal corporation for their professional corporation. For Chartered Professional Accountants licensed in Ontario, a professional corporation must be an Ontario corporation.
- Name of CPA Professional Corporation. A CPA Professional Corporation is subject to strict naming conventions. The name of the corporation:
- must adhere to the CPA Professional Corporation name guidelines, which are currently found here:
- must include the ending “Professional Corporation”.
- Articles of Incorporation. The Articles of Incorporation of the CPA Professional Corporation must include certain restrictions:
- Business Restriction in Article 5 of the Articles of Incorporation. The CPA Professional Corporation may not carry on a business other than the practice of the profession as defined in the bylaws of the Chartered Professional Accountants of Ontario or activities which are ancillary to that practice, 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 CPA Professional Corporation shall be legally and beneficially owned, directly or indirectly, by one or more Chartered Professional Accountants, other CPA Professional Corporations, or both.
- Directors and Officers. Only Chartered Professional Accountants can be directors and officers of the CPA Professional Corporation.
- Obtaining a Certificate of Authorization. Once incorporated a Chartered Professional Accountant must apply to CPA Ontario for a Certificate of Authorization. A Chartered Professional Accountant is not permitted to practice their profession through a 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 for the application can be found here.
As part of the application, the Chartered Professional Accountant will 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 Chartered Professional Accountants.
- Upload a copy of the Certificate and Articles of Incorporation for the Law Professional Corporation;
- Pay the applicable fee to CPA Ontario.
- Submit the certificate of Authorization (COA) through your CPA Ontario Portal
- Renewing your Certificate of Authorization. The Certificate of Authorization for a CPA Professional Corporation must be renewed every year. As part of the renewal process the Chartered Professional Accountant will need to do the following:
- Complete the renewal application
- Pay the Renewal Fee
Why Incorporate a professional corporation? / What are the advantages of Professional Corporation? / Should I incorporate a Professional Corporation?
- Tax Benefits. The main reason a Chartered Professional Accountant will want to incorporate a CPA Professional Corporation is for tax savings. By incorporating a CPA Professional Corporation, Chartered Professional Accountants 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 CPA Professional Corporation, Chartered Professional Accountants will have the ability to leave behind a portion of their business income in the CPA Professional Corporation and ultimately defer the payment of personal taxes on this income until the professional decides to pay themselves.
- Liability Protection. Although Chartered Professional Accountants cannot limit personal responsibility with respect to professional obligations, the CPA Professional Corporation does provide liability protection for non-professional obligations that are entered into by the professional corporation. For example if the CPA Professional Corporation is the tenant on a lease and no personal guarantee/indemnity is provided by the Chartered Professional Accountant, the landlord would only be able to claim against the CPA 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 Chartered Professional Accountant 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 Chartered Professional Accountants complete the transfer and file the joint election form in connection with their goodwill and other assets.
At Ordower Law, we can assist with your incorporation needs. Feel free to give us a call at 416.849.1900. You can book a call with us here.
For more general information on incorporating in Ontario or starting a business in Ontario, please view our guide here: Incorporate in Ontario and Canada- Everything You Need to Know.
