If you’re a professional, such as a doctor, lawyer, accountant, or engineer, you may have heard about the benefits of incorporating your practice. But, did you know there are different types of corporations to choose from in Ontario? Two popular options are a professional corporation (PC) and a regular corporation (RC). This blog will outline the differences between the two and help you determine which type of corporation is right for your professional practice.
Professional Corporation (PC)
A professional corporation is a special type of corporation available to certain professions in Ontario. In order to be eligible for a PC, you must be a licensed professional who is registered with a regulatory body, such as the Law Society of Ontario, the College of Physicians and Surgeons of Ontario, or the Institute of Chartered Accountants of Ontario.
The primary benefit of a PC is the potential for tax savings. By incorporating, you can split income among family members, which may result in a lower overall tax burden. Additionally, a PC may allow you to deduct expenses that are not available to individuals, such as health and dental benefits and life insurance premiums.
However, there are some restrictions on PCs that don’t apply to regular corporations. For example, PCs can only provide professional services related to the licensed profession. This means that a PC cannot engage in activities that fall outside the scope of the professional’s license, such as selling products or providing non-professional services. PCs are also subject to additional regulation and reporting requirements.
Regular Corporation (RC)
A regular corporation, on the other hand, is available to any business owner in Ontario, regardless of their profession. The main advantage of an RC is that it offers more flexibility in terms of the activities the corporation can engage in. An RC can provide any type of product or service, as long as it complies with applicable laws and regulations.
However, RCs are not eligible for the same tax benefits as PCs. Income earned by an RC is taxed at the corporate tax rate, which can be higher than the personal tax rate for individuals. Additionally, RCs do not have access to certain deductions and credits that are available to PCs.
Which Type of Corporation is Right for You?
The decision to incorporate as a professional corporation or a regular corporation depends on a variety of factors, including your profession, business goals, and financial situation. It’s important to speak with a lawyer and an accountant who can help you evaluate your options and make an informed decision.
If you’re a licensed professional in Ontario and want to explore the benefits of incorporating your practice, contact Falcon Law PC at 1-877-892-7778 or email@example.com. Our team of experienced lawyers can help you navigate the complex legal and regulatory requirements of professional corporations and regular corporations.