Navigating Professional Incorporations in Quebec: A Guide to the Legal Process
As a legal professional in Quebec, you may be considering starting your practice. One option to consider is the formation of a professional corporation.
Who Can Form a Professional Corporation?
A professional corporation is a legal structure that allows professionals, such as lawyers, doctors, dentists, and accountants, to incorporate their practice while still maintaining their professional status. In Quebec, professional corporations are regulated by the Professional Code (the "Code") and the Quebec Business Corporations Act (the "BCA").
Benefits Of a Professional Corporation
There are several benefits to incorporating your professional practice. One of the most significant advantages is that it can provide you with limited liability protection. This means that if your business faces legal action, your assets will be protected from any liabilities that arise from your practice. This can be especially important in professions where there is a high risk of malpractice lawsuits.
Incorporating also provides tax benefits. Professional corporations are taxed at a lower rate than individuals, and they can also take advantage of various tax deductions and credits that are not available to individuals. Additionally, using holdings companies and/or trusts can result in more potential tax advantages. Combining these strategies based on your individual needs can result in significant tax savings over time.
Another benefit is that it can help you attract and retain top talent. By offering shares in the corporation to employees, you can provide them with a sense of ownership and investment in the success of the practice. This can help you build a more committed and engaged team. Most professional regulations require a certain percentage of ownership to be retained by the professional. For example, lawyers are required to retain at least 50% of the controlling ownership when incorporating professionally. When issuing shares to employees, we consider their professional status, the rules of your profession, and your corporate structure to determine the best way to proceed.
Conditions of incorporating a professional corporation
To form a professional corporation in Quebec, you must meet certain requirements. First, you must be a member in good standing of a professional order recognized by the Code. Second, under section 187.11 of the Code, members of a professional order may incorporate to carry on their activities if certain conditions are met. These include:
The profession’s board of directors authorizing its members to operate through a corporation, under the terms and conditions, and restrictions determined in accordance therewith (per section 94(p) of the Code);
The members of the order must furnish and maintain security against professional liability on behalf of the corporation under the prescribed requirements under a regulation made by the board of directors (per section 93(g) of the Code); and
The members of the order declare that they are carrying on their activities under a corporation to the order under the conditions and procedures set by the board of directors (per the provisions of section 93(h) of the Code).
Third, you must comply with the requirements of the BCA, which includes filing articles of incorporation that take into account the rules set out in the regulation of your professional order. Essentially, while the Code allows professionals to exercise their activities as a corporation, we must analyze the regulations of each professional order to determine the rules and regulations necessary to ensure legally compliant professional incorporation.
Other Factors to Consider
Our business law firm offers comprehensive solutions tailored to your financial situation. After assessing your current goals and plans, in addition to the formation of a professional corporation, we may recommend incorporating a holding company, and/or creating a trust. We will guide you through the process of determining the optimal structure for your needs.
Upon creating your corporation, our firm will compile a minute book (read about the importance of a minute book for your corporation) containing critical documents such as the articles of incorporation, by-laws, and shareholders' agreements, where applicable. In addition, we will maintain registers for directors, officers, and securities, and record board and shareholders' meetings as well as their respective resolutions.
Furthermore, we will ensure a seamless transition to a professional corporation by handling all the necessary filings with the relevant parties and notifying your professional liability insurance of the new structure. We will also take care of all required updates and paperwork, including drafting yearly resolutions, to keep your corporation in good standing on an annual basis.
Is It the Right Choice for You?
It's important to note that incorporating a professional practice is not the right choice for everyone. There are start-up costs associated with incorporating, and on-going maintenance, accounting, and legal costs to consider so it may not be appropriate for solo practitioners or small practices. Consult with our business law firm to determine if incorporating your practice is the right choice for you.
In summary, a professional corporation is a legal structure that allows professionals to incorporate their practice while still maintaining their professional status. Incorporating your practice can provide you with limited liability protection, and tax benefits, and can help you attract and retain top talent. If you're considering incorporating your practice, book a consultation with our corporate & commercial lawyer today.
This blog post is not legal advice and is for general informational purposes only. Always speak with a lawyer before acting on any of the information contained herein.