Professional corporations are treated as an independent legal entity that exists separately from its shareholders. Generally speaking, it is worthwhile to incorporate a professional corporation if, as a Chartered Professional Accountant (a “CPA”), you are earning more money than what you require for personal use during the year. Keep reading to learn more about the tax advantages of incorporating, protection from certain financial liabilities and how you
can incorporate your professional corporation. Kahane Law Office in Calgary, Alberta has corporate lawyers whom set up chartered accountant professional corporations properly. We also maintain them properly.
Professional Corporations For Chartered Accountants
Several advantages exist for setting up chartered accountant professional corporations. As an accountant, your understanding of the tax advantages allows you to determine if this path is right for you. Basically, for example, a chartered accountant professional corporation provides a useful tax-deferral mechanism for CPAs. The three chief tax benefits you may take advantage of after incorporating a CPA professional corporation include:
- deferring taxes by retaining earnings in your professional corporation;
- issuing dividends to family members who are in lower tax brackets; and
- claiming a capital gains exemption of $800,000 if you sell the professional accounting practice.
Usually incorporating allows people to avoid liability as a shareholder. A chartered accountant professional corporation does not protect you from being sued personally in your capacity as an accountant. As a CPA, you are liable for professional errors made in your accounting practice including negligence. Therefore, it is imperative that you keep your professional liability insurance up to date. Furthermore, while shareholders have limited liability, directors of your professional corporation may still be subject to various risks including liability for unremitted GST and select environmental liabilities.
Why Incorporate A Professional Corporation?
In Alberta, in order for a CPA to provide accounting services to the public through a corporate form, he or she cannot offer services through a limited corporation. Rather, you must carry out services through a professional corporation. In the province of Alberta, CPA Alberta is the organization that governs Professional Accountants. They allow for accountants to set up a chartered accountant professional corporation.
What Can I Name My Professional Corporation?
According to Alberta’s Chartered Professional Accounts Act SA 2014 c C-10.2, section 40(2) provides that your professional corporation must include the words “Professional Corporation”. Further, it can include some variation of your name such as “J. Doe Professional Corporation”. However, no requirement exists to include the terms “CPA” or “Chartered Professional Accountant”.
In order to ensure that your selected name is not already in use, we must conduct a conduct a NUANs search before submitting your application. Once your professional corporation is registered, all signage relating to your practice should reflect the name of your professional corporation. You must change things such as commercial leases, photocopier leases, contracts, credit cards and bank accounts to the name of your professional corporation.
How Do I Register My Professional Corporation?
Firstly, CPAs must submit a professional corporation application along with the Articles of Incorporation (the “Articles”) to the Chartered Professional Accountants of Alberta (the “CPA Alberta”) for endorsement. The Articles must contain two schedules:
- Item 3 of the Articles – Restrictions on Transfer of Shares; and
- Item 6 of the Articles – Other Provisions.
You may submit your application via email to the CPA Alberta at [email protected]. Once submitted, provided that there are no outstanding items, an endorsement of the Articles will be emailed to you within 15 – 20 business days. To avoid delay, it is recommended that you speak to a corporate lawyer to ensure that your application is complete before submission.
Secondly, once endorsed, you must submit the Articles through a Corporate Registry agent to Service Alberta to register your professional corporation. You must request a copy of the Certificate of Incorporation and Registration Statement (including Schedules) from the Corporate Registry agent (collectively, the “Incorporation Documents”).
Lastly, you should submit the Incorporation Documents to the CPA Alberta via email to confirm the registration of your professional corporation.
Annual Fees For Maintaining A Chartered Accountant Professional Corporation
Your professional corporation pays an annual fee prescribed by the Chartered Professional Accountants of Alberta Resolutions. Currently, the annual fee to maintain a professional corporation registration with the CPA Alberta is $185 plus GST.
Remember, should there be any changes to the directors or shareholders of your corporation, you must inform the CPA Alberta within 15 days of such change. Further, before making any changes to the Articles, you must obtain approval from the CPA Alberta.
How Do I Terminate My Professional Corporation?
There are certain steps you must follow if you wish to dissolve your professional corporation. The key one is that you must provide written notification of the name of your professional corporation and the date of cessation to the CPA Alberta.
Why Seek The Assistance Of A Corporate Lawyer?
While you may incorporate your professional corporation for a nominal fee at any Alberta registries office, you will not be provided with any articles of incorporation, corporate bylaws, or receive assistance in issuing common shares to shareholders.
Conversely, corporate lawyers can assist you with properly setting up your professional corporation by preparing key corporate document. For example, we help with drafting your:
- Corporate minute book;
- Corporate legal documents; and lastly
- Issuing common shares to shareholders.
What Happens After I Incorporate My Professional Corporation?
After registering your professional corporation, the next step is to open a bank account in the corporation’s name. This is to facilitate your accounting practice’s financial transactions. Moreover, you must set up a business account with Canada Revenue Agency.
You are required to choose a fiscal year end date which is the end of your professional corporation’s taxation year. You can register your fiscal year end date upon filing your first T2 and AT1 corporate tax return. Finally, remember that the deadline for paying corporate taxes and filing returns is 3 months and 6 months after the corporation’s fiscal year end respectively.
Help Setting Up A Chartered Accountant Professional Corporation
If interested in setting up your CPA professional corporation, speak to one of our corporate lawyers today. Our Corporate Law Group has a wealth of experience to assist you in structuring your accounting practice. This allows you to reap the tax benefits of incorporating a professional corporation. If you are a doctor, lawyer, optometrist, chiropractor, physical therapist, veterinarian, architect, or a lawyer, and wish to set up a professional corporation, give us a call at 403-225-8810 or email us directly here.