October , 1999

Professional Corporations Not Necessary For Geoscientists or Engineers

By Mark Tokarik, LL.B., P.Eng.

Mark Tokarik is APEGGA's Assistant Registration and Compliance.

A number of Members have recently asked whether a professional engineer or geoscientist can incorporate as a Professional Corporation. The short answer is 'No'. More importantly, and more advantageously, professional engineers and geoscientists are permitted to incorporate regular corporations which offer more protection and benefits than Professional Corporations.

The essential difference between a regular corporation and a Professional Corporation is that the owners of a Professional Corporation have unlimited liability for the corporation's liabilities whereas the owners of a regular corporation enjoy limited liability. This means that creditors of a Professional Corporation can look to both the corporation's assets as well as to the personal assets of the owners to satisfy the corporation's liabilities, whereas the creditors of a regular corporation can generally look only to the assets of the corporation itself and cannot look to the personal assets of the owners.

Certain professions, including accounting, law, and medicine, can incorporate as Professional Corporations but cannot incorporate as regular corporations. They cannot incorporate as regular corporations because there is no specific legislation permitting them to do so. Engineers and geoscientists can incorporate as regular corporations because our governing legislation specifically allows us to do so.

Prior to 1975 doctors, lawyers, and accountants were not permitted to incorporate either as regular corporations or as Professional Corporations. In 1975, the legislation governing those professions was changed to allow them to incorporate as Professional Corporations. The impetus for these changes was concern over income taxation rates rather than concern over unlimited liability. These changes allowed lawyers, accountants, and doctors to be taxed at the same income tax rates as regular corporations but did not allow those professionals to escape unlimited liability.

Geoscientists and engineers are in a preferred position compared to that of lawyers, accountants, and doctors because we are permitted to practice our professions through regular corporations. If you are considering incorporating, you should talk to your lawyer and accountant to fully discuss the legal and financial implications of doing so.







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