Incorporating your professional practice is one of the most consequential tax and legal decisions you will make. As your Toronto professional corporations lawyer, our firm helps regulated professionals across the GTA, from lawyers and accountants to physicians, dentists, and engineers, structure, incorporate, and maintain a professional corporation that complies with both the Ontario Business Corporations Act and the rules of your governing body.

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What Is a Professional Corporation in Ontario?

A professional corporation (PC) in Ontario is a corporation incorporated under the Ontario Business Corporations Act (OBCA) that allows a regulated professional to carry on their professional practice through a corporate structure. Professional corporations are governed by section 3.2 of the OBCA and are subject to both the statute and the rules of the profession's governing body.

A PC is not the same as an ordinary Ontario business corporation. Once you incorporate, you cannot practise your profession through the corporation until your regulatory body has issued a Certificate of Authorization. The corporation can only carry on the practice of your specific profession, it cannot operate a side business, hold investment real estate as its primary activity, or run unrelated commercial operations through the same entity.

The OBCA also requires that the corporate name include the words "Professional Corporation" or, in French, "Société Professionnelle." Professional corporations in Ontario must be incorporated provincially under the OBCA, federal incorporation under the Canada Business Corporations Act is not an option for Ontario professional corporations.

For international-trained professionals setting up practice in Toronto, the regulatory layer on top of Ontario corporate law can be confusing. Our founder Nassira El Hadri, a Toronto corporate and commercial lawyer admitted to the Law Society of Ontario and herself practising through a Law Professional Corporation, advises professionals in English, French, Spanish, and Catalan.

Which Professions Can Incorporate a Professional Corporation in Ontario?

A wide range of regulated professions are eligible to incorporate a professional corporation in Ontario. Each profession is overseen by its own governing body, which approves the corporation and issues the Certificate of Authorization:

Lawyers and paralegals (Law Society of Ontario)
Physicians and surgeons (College of Physicians and Surgeons of Ontario)
Dentists (Royal College of Dental Surgeons of Ontario)
Dental hygienists, dental technologists, and denturists
Pharmacists (Ontario College of Pharmacists)
Nurses and nurse practitioners
Chiropractors (College of Chiropractors of Ontario)
Optometrists and opticians
Psychologists (College of Psychologists of Ontario)
Social workers and social service workers
Physiotherapists and occupational therapists
Massage therapists
Midwives
Dietitians
Medical laboratory technologists, medical radiation technologists, and respiratory therapists
Speech-language pathologists and audiologists
Veterinarians
Architects and engineers (under separate enabling legislation)
Chartered Professional Accountants (CPA Ontario)

Our firm regularly advises lawyers, accountants, and business professionals on incorporation, and serves regulated professionals across Toronto, Mississauga, Oakville, Burlington, Hamilton, Kitchener, Vaughan, and Markham.

Tax Advantages of a Professional Corporation in Ontario

Tax planning is the primary reason most Ontario professionals incorporate. The gap between personal and corporate rates is large enough to make incorporation meaningful even for a solo practice.

Tax Deferral on Active Business Income

Ontario's top personal marginal tax rate reaches 53.53% in 2025. A professional corporation that qualifies as a Canadian-Controlled Private Corporation (CCPC) pays a combined federal and provincial rate of roughly 12.2% on the first $500,000 of active business income under the Small Business Deduction (9% federal plus 3.2% Ontario). That difference, a deferral of approximately 41% for a top-rate professional, is the core financial reason to incorporate.

The benefit is a deferral, not a permanent saving. You still pay personal tax when you withdraw funds as salary or dividends. The opportunity lies in leaving after-tax earnings inside the corporation, investing them, and withdrawing in later years, often in retirement, when your personal rate may be lower.

Small Business Deduction Eligibility

The Small Business Deduction applies to the first $500,000 of active business income earned by a CCPC. Most professional corporations qualify, though the deduction phases out where the CCPC and its associated group hold taxable capital between $10 million and $50 million, and is eliminated above $50 million.

Income Splitting Within Tax on Split Income Limits

Certain professions, notably medicine and dentistry under Ontario Regulation 665/05, allow a spouse and adult children to hold non-voting shares in the PC. Dividends paid on those shares can shift income to family members in lower tax brackets.

The federal Tax on Split Income (TOSI) rules under the Income Tax Act have narrowed this opportunity significantly. Where a family member does not contribute meaningful labour or capital to the practice, dividends may be taxed at the highest personal rate, erasing the benefit. Martina Caunedo, our tax lawyer, has 12+ years of international tax experience and advises on the TOSI exclusions that apply and the remuneration strategies that actually work.

Lifetime Capital Gains Exemption on Sale

The Lifetime Capital Gains Exemption is $1,250,000 for dispositions of qualifying small business corporation shares in 2025. For professionals planning to sell a practice down the road, structuring the corporation to meet the qualifying thresholds early, and keeping the shares qualifying over time, can shelter a substantial portion of the sale proceeds.

What a Professional Corporation Does Not Do

A PC does not provide limited liability for professional negligence. You remain personally liable for your own malpractice regardless of whether you practise through a corporation. The corporation limits only commercial liability, leases, bank loans, supplier contracts, and only if you have not given a personal guarantee. Most landlords and lenders will require one.

Requirements and Restrictions for a Professional Corporation Under Ontario Law

The OBCA and the governing body of each profession impose specific requirements that distinguish a professional corporation from an ordinary Ontario corporation.

Naming Rules

The corporation's name must include "Professional Corporation" or "Société Professionnelle." Many health profession corporations must also include the surname of a licensed shareholder as it appears on the profession's register, for example, "Smith Medicine Professional Corporation." The name must simultaneously satisfy the OBCA and your governing body's naming guidelines.

Ownership of Shares

All issued and outstanding shares of a professional corporation must be legally and beneficially owned, directly or indirectly, by one or more members of the same profession. Where the profession permits family shareholders, non-voting shares may be held by specified family members under that profession's rules.

Directors, Officers, and Scope of Practice

All directors and officers of the corporation must be licensed members of the same profession. The corporation may only carry on the practice of that specific profession, it cannot run unrelated businesses, and it cannot hold investments as its primary activity.

Certificate of Authorization

You cannot practise through the corporation until your governing body issues a Certificate of Authorization. Every profession has its own form, fee, and timeline:

Lawyers apply to the Law Society of Ontario. The current fee is $250 plus HST, with annual renewal of $100 plus HST between October 1 and December 31.
Physicians apply to the College of Physicians and Surgeons of Ontario.
Dentists apply to the Royal College of Dental Surgeons of Ontario.
Accountants apply to CPA Ontario.

Consequences of Disqualification or Death

A licensed shareholder, director, officer, or employee who becomes disqualified to provide professional services must sever all employment and financial ties with the corporation. Failure to correct this can be grounds for dissolution of the corporation.

On the death of a shareholder, the corporation must notify the governing body as required by the rules of that profession, and all shares owned by the deceased must generally be acquired by a qualified professional within a time limit set by those rules. A well-drafted shareholders' agreement, often backed by corporate-owned life insurance, is what makes those deadlines workable.

The Incorporation Process Step by Step

Setting up a professional corporation in Ontario is a multi-step process that spans corporate filings and regulatory approvals. Understanding the sequence helps you plan your practice launch or transition.

Name search and reservation, We run a NUANS name search and confirm the proposed name complies with both the OBCA and your governing body's naming rules.
Articles of Incorporation, We draft and file Articles of Incorporation through the Ontario Business Registry, including the professional corporation designation and the restrictions required by section 3.2 of the OBCA.
Organizational records, We prepare the minute book, by-laws, organizational resolutions, share subscriptions, director and officer appointments, share certificates, and corporate registers.
Certificate of Authorization, You apply to your governing body for the Certificate of Authorization. We provide the documents your regulator requires, copies of the Articles, Certificate of Incorporation, and corporate information, and guide you through the application.
Shareholders' agreement, We draft a shareholders' agreement covering death, disability, disqualification, and departure. For solo practices with family non-voting shareholders, the agreement clarifies what happens on the death of the practising shareholder.
Tax elections and rollover, If you are converting an existing sole proprietorship into a PC, a section 85 rollover under the Income Tax Act can transfer goodwill, equipment, and receivables into the corporation on a tax-deferred basis. We coordinate the legal steps with your accountant's tax filings.
Ongoing compliance, Annual return filings, minute book updates, Certificate of Authorization renewals, and continuing compliance with your governing body.

The incorporation filing itself can typically be completed in one to two business days through the Ontario Business Registry. The Certificate of Authorization timeline varies by profession, some regulators issue within days, others take several weeks. With legal assistance, a realistic end-to-end timeline is two to four weeks.

We handle steps one through three, five, and six directly, and we guide you through step four with the relevant regulator. Our Toronto office at First Canadian Place serves professionals across the GTA, and we work virtually with clients throughout Ontario. Call (437) 974-2374 to discuss your incorporation timeline.

Shareholders' Agreements for Professional Corporations

Every professional corporation should have a shareholders' agreement, including solo practices with family shareholders. The agreement is what converts the rigid rules of the OBCA and your governing body into a workable plan for the life of your practice.

Provisions Specific to Professional Corporations

Qualification clause, What happens if a shareholder loses their licence or is suspended? The PC regulations require severance of all employment and financial ties; the shareholders' agreement specifies how and at what price the corporation or remaining shareholders acquire the disqualified member's shares.

Death and disability buyouts, Mandatory buyout triggers on death and long-term disability, funded by corporate-owned life and disability insurance. The buyout must be structured to meet the reporting and transfer deadlines imposed by each profession's regulations following the death of a shareholder.

Restriction on transfer, Shares may only be transferred to qualified members of the same profession. The agreement enshrines this regulatory requirement in enforceable contractual language.

Non-compete and non-solicitation, Especially important in multi-professional practices where partners bring their own patient, client, or referral base.

Valuation method, A formula, often a multiple of revenue or earnings, to determine practice value on a buyout event, so disputes about price do not derail the transition.

Unanimous Shareholder Agreements

Under the OBCA, a unanimous shareholder agreement can restrict the powers of directors and allocate management authority to shareholders. For professional corporations with multiple principals, this is often the cleanest governance structure.

Nicholas Dempsey, our corporate lawyer, has advised on 90+ asset and share sale transactions, and brings that buy-sell structuring experience directly to our work for professional corporations. Nassira El Hadri's M&A and financing background adds depth for complex multi-professional structures and practice acquisitions.

Professional Corporation vs. Other Business Structures

Choosing between a professional corporation, a sole proprietorship, a partnership, or an LLP depends on income level, liability exposure, succession plans, and profession-specific rules.

Professional corporation vs. sole proprietorship, A sole proprietor pays tax on every dollar earned at personal rates up to 53.53% in Ontario in 2025. A professional corporation defers tax at roughly 12.2% on the first $500,000 of active business income. The trade-off is setup cost, annual accounting, and regulatory compliance.

Professional corporation vs. ordinary Ontario corporation, An ordinary corporation cannot be named a "Professional Corporation" and cannot rely on the regulatory exemptions that let a professional practise through a corporate form. If your profession requires a PC, an ordinary corporation is not a substitute.

Professional corporation vs. partnership, General partnerships expose each partner to the professional negligence of every other partner on a joint-and-several basis. A PC limits commercial liability but not professional liability. Lawyers and accountants in Ontario also have access to Limited Liability Partnerships (LLPs), which offer a separate liability shield for professional negligence, that is a distinct planning conversation.

Professional corporation vs. federal corporation, Ontario professional corporations must be incorporated provincially under the OBCA. Federal incorporation under the CBCA is not available for Ontario PCs.

When incorporation may not make sense, If your net professional income is below roughly $100,000 and you withdraw every dollar each year, the ~$2,000 setup and $2,000–$3,000 annual accounting cost may outweigh the tax deferral. Always consult your accountant before incorporating; we advise on the legal structure once the economics are clear.

Frequently Asked Questions About Professional Corporations in Ontario

Do I still need malpractice insurance if I have a professional corporation?

Yes. A professional corporation does not shield you from personal liability for your own professional negligence. Every licensed professional in Ontario remains personally responsible for their clinical, legal, or professional work regardless of corporate form, and most governing bodies require ongoing malpractice or professional liability insurance as a condition of licence.

Can I convert my existing sole proprietorship to a professional corporation?

Yes. Most Ontario professionals who incorporate are transitioning an existing sole proprietorship. A section 85 rollover under the Income Tax Act allows the tax-deferred transfer of goodwill, equipment, accounts receivable, and other business assets to the new corporation. The rollover requires coordinated legal and accounting work to avoid unintended tax consequences.

What happens to my professional corporation if I retire or stop practising?

You must surrender your Certificate of Authorization to your governing body, remove "Professional Corporation" from the corporate name, and either dissolve the corporation or convert it to an ordinary Ontario corporation. Many professionals use this transition to continue holding investments that accumulated inside the PC during practice.

Can I use my professional corporation to invest in real estate or other businesses?

Generally no. The OBCA restricts a professional corporation to carrying on only the practice of the specific profession. Limited ancillary activities directly related to the profession may be permitted, but operating as a landlord or running an unrelated business through the PC is not allowed without restructuring. Separate corporate vehicles typically hold those investments.

How often do I need to renew my Certificate of Authorization?

Most governing bodies require annual renewal. The Law Society of Ontario, for example, opens the renewal window from October 1 to December 31 each year, with a current renewal fee of $100 plus HST. Other regulators set their own renewal cycles and fees, always confirm your profession's specific deadlines to avoid a lapse in authorization.

Is a professional corporation right for a newly licensed professional in Toronto?

It depends on income and cash flow. A common threshold is net professional income of roughly $100,000 before incorporation makes economic sense, but the answer is driven by your accountant's tax modelling. Once you have decided to incorporate, our firm handles the legal structure, Articles, minute book, and shareholders' agreement.

Sources & Official Resources

Ontario Statutes and Regulations Cited

Federal Statutes Cited

Tax Rates and Thresholds

Regulatory Bodies and Filing

Contact a Toronto Professional Corporations Lawyer Today

If you are considering incorporating your professional practice, or you already have a professional corporation that needs a proper shareholders' agreement, updated minute book, or succession structure, Hadri Law is here to help. Our lawyers serve regulated professionals across Toronto and the GTA in English, French, Spanish, and Catalan, a distinct advantage for internationally-trained professionals building practices in Ontario.

Call (437) 974-2374 for a free consultation.

First Canadian Place, 100 King Street West, Suite 5700, Toronto, ON

This content provides general information and is not legal advice. Every situation is different. Contact a lawyer to discuss your specific circumstances.

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