A professional corporation is a corporation engaged in providing professional services, where a profession governed by its professional body allows its members to practice through a corporation as opposed to a sole proprietorship or partnership. Examples include Doctors, Dentists, Chiropractors, Lawyers and Accountants. To have a Professional Corporation you must belong to a professional governing body.
The main advantages of professional corporations are:
Ø Having a Professional Corp. allows you to belong to Professional Organizations.
Ø Having a Professional Corp. allows you to be recognized as a Professional.
Ø Many people like to deal with Professionals that are governed by another body for accountability.
The main disadvantages of professional corporations are:
Ø There are more tax filing and other rules for a Professional Corporation than a regular Corporation.
Ø A Professional Corp’s life is ended if the person/people holding the designation passes away or loses their license.
Ø You are under the rules of the Prof. Organization that may not allow you to have shareholders or partners that don’t belong to the organization. (hold credentials). Typically the exemption to this is immediate family members, such as a spouse or children.
Ø The articles of incorporation, in addition to all other requirements, must limit the activities of the corporation to the profession.
If you belong to a professional governing body they may require you to have a professional corporation. Please contact us if you require more information on business structuring or professional corporations.
The last part of the series on structures will be about Charities. Check back next week and we’ll discuss some general information about these organizations!
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