So in this blog, I’m going to be talking about Dentistry Professional Corporations and the nature of share ownership.
Dentistry Professional Corporations
First, we start off with the idea that a Dentistry Professional Corporation is THE ONLY type of corporation that is allowed to provide dental services to the public in Ontario. Dentistry professional corporations are two things:
- an Ontario for-profit corporation
- holding a Certificate of Authorization from the Royal College of Dental Surgeons
Now, a dentist could offer dental services through various types of legal structures – for example, through themselves (i.e. as a sole practitioner), with others (e.g. through a partnership), or through a corporation (e.g. as an employee of a dentistry professional corporation). Dentistry Professional Corporations are SEPARATE LEGAL ENTITIES from the dentists who create them and who provide services through them. That’s why dentists can AND SHOULD (for tax saving purposes) have employment agreements with their dentistry professional corporation.
Now that you have a basic understanding of what a dentistry professional corporation is and how it is separate from its owners and managers let’s talk a little bit more about owning a dentistry professional corporation.
Authorized to Issue
First, when the corporation is first created – by filing the articles of incorporation with the government – the corporation will be authorized (i.e. allowed) to issue (i.e. to provide to someone who will become a shareholder) SHARES of a certain class or series. Now, a share is a document that signifies ownership in the corporation. The articles of incorporation will describe what the rights, duties, and privileges of the shares are. Those things could include the right to vote (e.g. to elect a new board of directors), the right to receive dividends, and the right to participate in the assets upon the dissolution of the corporation. The specifics of those rights can actually change by creating new classes of shares. But all the shares of the same class or series must be treated equally.
Issued and Outstanding
One of the first things that the incorporators of the corporation (i.e. those people who create the corporation) will do is ISSUE shares to individuals (who will become shareholders). The shareholders will need to provide money, property, or have rendered past services to the corporation in exchange for receiving the shares. The way this process happens is quite simple: the directors meet and pass a resolution issuing shares to certain people in exchange for one of the aforementioned things (typically money). This all gets recorded in the corporation’s minute book. Share Certificates may then be issued, showing that a certain person is the registered owner of a number and class of shares of the corporation.
Restrictions on Share Ownership
Now, when it comes to dentistry professional corporations, not everyone can own shares of a dentistry professional corporation. Indeed, only dentists can own voting shares. Dentists’ immediate family members (e.g. spouse, child, or parent) can own non-voting shares. And only one of those previously mentioned people can hold non-voting shares in trust for a voting dentist shareholder’s minor children.