I’ve been blogging a lot about incorporating a dental professional corporation in the past little while. In my last blog, for example, I talked about the 2 main steps you need to follow to have a dentistry professional corporation: (1) incorporate a business and (2) get a certificate of authorization for that corporation. You need the latter in order for the corporation to be a regulated health professional corporation. In this blog, I’ll be talking about some of the nuances you should be familiar with in this process.
Lawyers generally work with your accountant to figure out the best share structure. Remember: whoever owns the shares controls the corporation. But shareholders can also own non-voting shares, which means that they have no right to elect the board of directors. So, in a typical share structure for a dentistry professional corporation, you’ll have the dentists owning the voting shares (also called common shares) and then you’ll have the dentists’ family members owning non-voting shares. There are generally special shares for dividend sprinkling. The idea here is that the corporation can, if it has retained earnings in the year (i.e. earnings after taxes, interest, amortization, etc.), then the board of directors can declare and issue dividends to certain types of shareholders. Finally, you can put redemption provisions into certain shares so that the board of directors or the shareholders themselves can redeem shares for a set amount of money (e.g. $1). This is a great mechanism to use if the corporation is ever going to get sold and you need to buy back all of those outstanding shares.
Certificate of Authorization
A corporation needs a Certificate of Authorization from the Royal College of Dental Surgeons of Ontario if it wants to practice the business of dentistry. In fact, the articles of incorporation (i.e. the document you file with the government in order to create the corporation) need to restrict the corporation’s business to only practicing dentistry and things related to that.
Now, in order to obtain your certificate of authorization, you’ll need a lawyer’s help. There are statutory declarations that require you to swear certain things are true before a commissioner of taking oaths (e.g. a lawyer). You’ll also need to have notarized (i.e. true copies) copies of things like your articles of incorporation and Status Certificate. Again, a lawyer can do this for you. Finally, a lawyer will double-check to make sure that all of the College’s requirements have been met (e.g. fee, application, supporting documentation, etc.). It typically takes 5-10 business days for the College to process your paperwork and issue the corporation a Certificate of Authorization.
Now, the corporation is a separate legal entity. That means that it’s separate from its owners (shareholders) and managers (i.e. directors, officers, and employees). So what does this mean for the dentists, dental hygienists, and receptionists working within the professional corporation? Well, they are generally employees of the corporation. They receive employment income and get taxed on it. There may be different relationships too. For example, a dentist may show up every now and then, have their own clients, use their own tools, and be considered an independent contractor of the professional corporation.
The relationship matters for tax purposes (e.g. independent contractors can write off their reasonable business expenses), as well as for minimum employment standards (e.g. minimum pay, maximum hours, etc.). So dentists should consider what their relationship is going to be and whether an employment agreement is necessary.
Remember: a dentistry professional corporation is still a corporation (just like a limited partnership is still a partnership). This means that it will have a basic corporate structure comprised of shareholders who elect directors and directors who appoint officers and officers who hire employees. So don’t forget how that structure works and who is responsible for what and accountable to whom!
Another important thing to keep in mind is that when it comes to advertising your dentistry professional corporation, or simply putting its name on an invoice to clients, you need to tell them that the business is being carried on by a dentistry professional corporation. Here’s what I mean. Let’s say your corporation is called Carabash Dentistry Professional Corporation. Now let’s say you want to advertise it as “Yonge Street Dental Clinic” because it happens to be on Yonge Street. Normally, you would register that name as a tradename under the Business Names Act. Why? Well, because a corporation cannot carry on business under any name (other than its own name) unless that name has been registered. Then, when it comes to invoices, contracts, etc. you’ll need to state somewhere that Carabash Dentistry Professional Corporation carries on business as “Yonge Street Dental”. If you want to read up more about the liability that individuals face when they don’t make it clear that they are doing business as a corporation, you can see my other blog here