Incorporating a Medicine Professional Corporation in Ontario

September 7, 2022 | By admin

Introduction

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.