Permitted Business Structures - The Law Society of Upper Canada

LAW SOCIETY OF UPPER CANADA ~ INFORMATION SHEET
PERMITTED BUSINESS STRUCTURES
All licensees may practise as sole practitioners, partners or in a professional corporation.
Business corporations are not permitted to provide professional services to members of
the public. Licensees are encouraged to seek professional advice on the best business
structure for their particular situation.
Professional Corporations
The regulatory framework for professional corporations derives from two sources:
• the Ontario Business Corporations Act (OBCA) and
• the Law Society Act, sections 61.0.1 to 61.0.9 and By-law 7, Part II.
The OBCA defines a professional corporation as ‘a corporation incorporated or continued
under OBCA that holds a valid certificate of authorization issued under an Act governing
the profession’ – in this case the Law Society Act (LSA). A ‘member’ is defined in the
OBCA as a member of a profession governed by an Act that permits professional
corporations.
The OBCA sets conditions that must be satisfied by all professional corporations:
1. All issued and outstanding shares of the corporation must be legally and
beneficially owned, directly or indirectly, by one or more members of the same
profession.
• This means that family members or associates who are not members of the
profession may not be shareholders of the professional corporation.
• Multi-discipline practices are not permitted in the form of professional
corporations with shareholders who are members of different professions.
However, s. 61.0.1(1)(c) of the Law Society Act permits a professional
corporation with lawyers and paralegals as shareholders.
• Holding companies are permitted as shareholders but with the same
limitations. The shares in the holding company must be wholly owned by
the member(s) in question and may not be owned by family members or
associates. (You cannot do indirectly what is impermissible directly.)
2. All officers and directors of the corporation must be shareholders of the
corporation.
3. The name of the corporation must include the words “Professional Corporation”
or “Société Professionelle” and must comply with the OBCA regulations and the
rules and by-laws of the respective profession.
• The Law Society’s By-law 7, Part II and Rule 3.02 of the Rules of
Professional Conduct apply. As well, Convocation approved a policy
regarding appropriate names when the name rule was expanded to
permit some trade names.

• The words “Professional Corporation” must appear in full and not
separated by other words or punctuation. This replaces Inc., Corp., or
other forms that identify corporations.
4. The corporation may not have a number name.
5. The articles of incorporation must provide that the corporation may not carry on
business other than the practice of the profession, but this does not prevent the
corporation from carrying on activities related to the practice of the profession,
including the temporary investment of surplus funds earned by the corporation.
• This restriction must be included in the articles of incorporation of the
professional corporation submitted to the Law Society submitted with
an application for a certificate of authorization.
The OBCA also provides that professional liability is not affected by practising through a
professional corporation.
Law Society’s By-law 7, Part II
A professional corporation may not start practice without first obtaining a certificate of
authorization from the Law Society. (Only a corporation composed of persons licensed
by the Law Society may apply). Application is a two-step process:
• First, the Law Society must approve the corporate name to be used
• Second, the professional corporation’s articles of incorporation must
be approved by applying for a Certificate of Authorization
Permitted Names
• A professional corporation may not use the name of another professional
corporation or a name that is confusingly similar. The name may include that of
any shareholder of the corporation, except a shareholder who becomes a member
of a tribunal or any other office with duties incompatible with the practice of the
profession.
• The professional corporation may retain the name of a deceased licensee who
practised law or provided legal services through the corporation, or a deceased
shareholder of the professional corporation.
• The professional corporation’s name may include the phrases “and Associates” or
“and Company” if three or more licensees practice law and/or provide legal
services through the professional corporation. (A paralegal associate would be an
employee of the professional corporation in which they provide legal services).
• In October 2006, Convocation clarified that a person cannot be considered an
‘associate’ if the person is the principal or employee of another entity.
2

• In May 2004, Convocation approved criteria for assessing whether a name is
misleading. For example, names may not include,
o reference to specific geographic locations, government agencies, public or
charitable legal services organizations, other non-legal corporate entities,
cultural, racial, ethnic or religious groups or organizations, existing law
firms, or other entities or organizations (e.g. “Osgoode Hall Law
Professional Corporation”);
o language that implies the firm is the only or the best firm, or would be
misleading as to the number of licensees practising in the firm or their
status;
o implying the existence of a partnership, affiliation, or association between
licensees when no such relationship exists;
o language that is specifically prohibited by statute or that is demeaning,
degrading or derogatory.
Certificate of Authorization
Applications for a Certificate of Authorization must include
• the application form,
• the articles of incorporation (and where necessary articles of
amalgamation or articles of continuance) and
• the application fee.
The certificate will be issued if,
• the corporation complies with OBCA and LSA requirements for a professional
corporation,
• the name of the professional corporation complies with OBCA and Law Society
requirements and policies,
• the directors are licensees none of whose licence has been suspended, and
• the individuals who will practise law or provide legal services through the
corporation are licensed by the Law Society to do so.
The certificate is valid until December 31 of the year of its issue and must be renewed
annually by way of an application with a renewal fee. Renewal applications must be
received 90 days before the certificate’s expiry date. The renewal certificate is valid until
December 31 of the year for which it is renewed.
A replacement certificate may be issued for a fee if a certificate is lost or there is a
change of information. The replacement certificate is valid until December 31 in the year
it is issued.
The professional corporation must apply to the Law Society to surrender the certificate of
authorization if the corporation does not wish to renew its certificate, no longer wishes to
practise law or provide legal services in Ontario, or wishes to voluntarily wind up or
dissolve.
3