Ontario Standard Corporation vs Professional

Ontario Standard Corporation vs. Professional Corporation: Unraveling the Differences

When it comes to incorporating your business in Ontario, understanding the nuances between different corporate structures is crucial. Two common options are the Ontario Standard Corporation and the Professional Corporation. Let’s explore their differences, benefits, and considerations.

The decision to establish an Ontario Standard Corporation or a Professional Corporation depends on various factors, including the nature of the business or profession, regulatory requirements, tax considerations, and personal preferences.

1. Purpose and Eligibility:

Standard corporations are suitable for individuals and businesses engaged in various industries and sectors for profit-making activities. Any individual or group can form a standard corporation to conduct commercial activities, including retail, manufacturing, technology, consulting, and services.
Professional corporations are specifically designed for regulated professionals who provide specialized services in fields such as medicine, law, accounting, engineering, architecture, and veterinary medicine. Professionals must be licensed or registered with a designated regulatory body to establish a professional corporation and provide services within their regulated profession.

2. Ownership and Shareholders:

Standard corporations can have one or more shareholders (individuals or entities) who own shares in the corporation. Shareholders of standard corporations can be individuals, other corporations, or entities, and there are generally no restrictions on their professional qualifications or licenses.
Professional corporations are typically owned and operated by licensed professionals practicing the same regulated profession. Shareholders of a professional corporation must be licensed members of the same regulated profession, ensuring that ownership and control remain within the professional community.

3. Regulatory Oversight:

Standard corporations are subject to general corporate laws and regulations applicable to businesses in Ontario. The activities of standard corporations may be subject to specific industry regulations based on their sector of operation.
Professional corporations are governed by both corporate laws and regulations specific to the regulated profession. Professional corporations must comply with professional standards and codes of conduct established by the respective regulatory body overseeing the profession.

4. Liability and Risk Management:

Shareholders of standard corporations benefit from limited liability, protecting their personal assets from business debts and liabilities.
Shareholders of professional corporations also benefit from limited liability against professional liabilities and malpractice claims, however, professional liability insurance is often required or recommended for additional protection against claims related to professional services.

5. Tax Considerations:

Standard corporations are subject to corporate income tax rates on their profits, and shareholders may face personal income tax on dividends received. Corporations can engage in tax planning strategies to optimize tax efficiency and manage taxable income.
Professional corporations may benefit from potential tax savings, as professional income earned through a PC may be subject to lower corporate tax rates compared to personal income tax rates. Professionals can use professional corporations to defer tax payments and reinvest surplus income back into the business.

Conclusion:

In summary, both the Ontario Standard Corporation and the Professional Corporation offer distinct advantages and considerations for individuals seeking to establish a corporate entity in Ontario. Standard corporations offer flexibility for various commercial ventures, while professional corporations are tailored specifically for licensed professionals operating within regulated professions.

Understanding the differences between these two types of corporations is essential for making the right choice based on specific business or professional needs.