Common Professional Corporation Mistakes Regulated Professionals Make

Incorporating a professional corporation in Ontario can be a powerful step for regulated professionals. When done correctly, it supports risk management, regulatory compliance, and long term practice planning.

When done incorrectly, it creates compliance issues that often surface at the worst possible time.

Many professional corporation problems are not the result of bad intentions. They arise because professional corporations operate under a unique combination of corporate law and regulatory rules that are frequently misunderstood or overlooked.

This article outlines the most common professional corporation mistakes regulated professionals make and why addressing them early matters.

Mistake 1: Assuming Incorporation Alone Is Enough

One of the most common misunderstandings is assuming that filing incorporation documents automatically authorizes the corporation to practise the profession.

In reality:

• Incorporation creates the legal entity

• Regulatory authorization permits professional practice

Without the required Certificate of Authorization, the corporation may exist but may not be permitted to practise.

This mistake is especially common when incorporation is handled through online services or non legal providers.

Mistake 2: Operating Without a Certificate of Authorization

Closely related is the mistake of operating a professional corporation without obtaining or maintaining a valid Certificate of Authorization.

This can occur when:

• The requirement was never explained

• The application was delayed

• Renewal obligations were missed

• The professional assumed the certificate was optional

Operating without authorization can expose professionals to regulatory and disciplinary risk.

Mistake 3: Using a Non Compliant Corporate Name

Professional corporations must follow strict naming rules set by the applicable regulator.

Common naming issues include:

• Omitting required wording such as Professional Corporation

• Using trade names that are not permitted

• Including branding that violates regulator policies

• Incorporating before name approval where required

Name issues often require amendments or rebranding to correct.

Mistake 4: Incorrect Share Ownership or Control

Professional corporations are subject to strict ownership and control rules.

Common errors include:

• Issuing shares to non professionals where prohibited

• Granting voting control improperly

• Failing to structure permitted non voting shares correctly

• Not aligning share structure with regulator requirements

These issues can invalidate authorization or require restructuring.

Mistake 5: Relying Solely on Accounting or Online Incorporation Services

Accountants and online incorporation platforms play important roles, but professional corporations involve legal and regulatory issues that go beyond filing and tax planning.

These providers often do not:

• Assess regulatory compliance

• Advise on professional liability implications

• Structure ownership for future changes

• Coordinate incorporation with authorization requirements

As a result, professionals may believe everything is in order when key issues remain unaddressed.

Mistake 6: Assuming Incorporation Eliminates Professional Liability

Another common misconception is believing that incorporation eliminates personal professional liability.

In reality:

• Professionals remain personally liable for professional negligence

• Professional liability insurance remains mandatory

• Incorporation primarily affects business and contractual risk

Misunderstanding this distinction can lead to false confidence and poor risk management.

Mistake 7: Failing to Review or Update the Structure Over Time

Professional practices evolve.

New partners join. Revenue increases. Services expand. Regulatory rules change.

Many professionals fail to revisit their corporate structure, leading to:

• Outdated share arrangements

• Compliance gaps

• Misalignment with current practice realities

Periodic review is essential.

When These Mistakes Usually Surface

Professional corporation issues often emerge:

• During regulatory audits

• When complaints are made

• During financing or lease negotiations

• When bringing on associates or partners

• When preparing for sale or succession

At that point, timelines are compressed and stress is higher.

Can These Mistakes Be Fixed?

In many cases, yes.

Fixing issues may involve:

• Applying for missing authorization

• Amending corporate records

• Restructuring share ownership

• Correcting naming issues

• Aligning operations with regulatory rules

The complexity of the fix depends on how long the issue has existed and the nature of the non compliance.

What Professionals Often Say After Fixing These Issues

After addressing professional corporation issues, many professionals say they:

• Were unaware of the rules initially

• Assumed incorporation was administrative

• Would have sought legal advice earlier

• Felt relief once compliance was confirmed

Most problems are manageable when addressed proactively.

How to Avoid These Mistakes

Avoiding professional corporation issues requires:

• Understanding regulator requirements

• Coordinating incorporation and authorization

• Structuring ownership correctly

• Reviewing compliance periodically

• Involving legal counsel familiar with professional corporations

This approach reduces risk and supports long term practice stability.

Book a Consultation

If you are a regulated professional and are unsure whether your professional corporation is compliant, or if you suspect issues with authorization, naming, or structure, you can Book a Consultation to review your corporation and address any concerns.