What the Law Society actually permits
A law professional corporation is an ordinary Ontario business corporation with a Certificate of Authorization from the Law Society of Ontario, renewed annually. Its name must include "Professional Corporation", its articles restrict it to the practice of law, and every shareholder, director and officer must be a licensee, a category that includes paralegals. Your spouse cannot hold shares, your children cannot hold shares, and no holding company can sit above it. A PC can also hold your partnership interest in a larger firm, which is where many partner-level corporations show up.
Two things do not change. Professional liability stays personal, the corporation is no shield against a negligence claim, and LawPRO coverage continues as before. Every trust accounting obligation under By-Law 9 follows the practice into the corporation intact.
The case is deferral, so do the deferral math
An Ontario CCPC pays roughly 12.2% on its first $500,000 of active professional income; the top personal rate is about 53.5%. Every dollar of profit the corporation keeps therefore works with roughly 41 cents more capital than a dollar taxed in your hands, and the gap compounds: it can fund next year's disbursements, a practice purchase, or an investment account inside the corporation.
The catch is the word "keeps". Draw everything out as salary or dividends and integration mostly unwinds the benefit, leaving you with a T2, corporate legal fees and an annual LSO renewal as pure cost. Our honest screen: a practice consistently retaining meaningful profit each year usually benefits; one spending every dollar it earns usually should not bother. Heavy savers should also know the passive income grind: once investment income inside the corporate group passes $50,000 a year, the small business limit starts shrinking.
| Sole practitioner | Professional corporation | |
|---|---|---|
| Tax on profit | Personal marginal rates up to ~53.5% | ~12.2% on the first $500,000 kept in the PC |
| Year-end | December 31 | Any fiscal year-end you choose |
| Who can own it | You alone | LSO licensees only; no family, no holdco |
| Liability | Personal | Negligence still personal; ordinary trade debts sit at the corporate level |
| Admin | T1 with T2125 | T2, corporate records, annual Certificate renewal |
What incorporating will not do
It will not split income with family. Medicine and dentistry get a carve-out for non-voting family shares, and then TOSI intervenes anyway; a law PC simply cannot issue them. It will not reduce Law Society obligations, change the trust rules or lower LawPRO premiums. And the lifetime capital gains exemption, now $1.25 million, is real but rarely the point: law practices sell less cleanly than clinics, and goodwill attached to one practitioner's name is hard to hand to a buyer. If a sale is plausible, we plan share purity early; we just never let the LCGE carry the incorporation decision alone.
Doing it cleanly
Sequence matters more than speed. We incorporate at a fiscal-year boundary where possible, move practice assets in under a section 85 rollover so nothing is triggered on the way in, register the new HST account, re-paper the trust and bank arrangements, and put you on the corporation's payroll with a salary-dividend mix designed against your actual spending. A non-calendar year-end is worth choosing deliberately, because it opens bonus and income-timing options a calendar-year sole practitioner never has.
Our Incorporation engagement covers the structure, the elections and the first-year filings, then hands off into Tax Planning & Advisory for the salary-dividend design. If the math says stay a sole practitioner, we say so in the first meeting, and the discovery call costs nothing but fifteen minutes. We run this analysis for lawyers across Mississauga and the GTA every year, and "not yet" is a common, correct answer.
Source: Ontario — Business Corporations Act.
