Choosing the right business structure is one of the most important decisions any professional or business owner will make. For doctors, dentists, lawyers, accountants, engineers, and other licensed practitioners, understanding the difference between a Professional Corporation in Alberta and a regular corporation is essential – especially when it comes to tax planning, liability protection, ownership rules, and regulatory compliance.
Although both structures are incorporated under the Alberta Business Corporations Act, they operate very differently. Professional corporations are governed not only by provincial corporate law but also by professional regulatory colleges, making them more restrictive but also uniquely beneficial for certain individuals. Regular corporations offer greater flexibility, but they lack the specialized features that regulated professionals may require.In this comprehensive guide, we break down the major differences between these corporate structures, compare tax and liability rules, and highlight when each option is appropriate. We also explain how we, at Business Alberta Online, help professionals set up their corporation correctly, efficiently, and in full compliance with Alberta requirements.
What Is a Professional Corporation in Alberta?
A Professional Corporation in Alberta is a specialized type of corporation reserved exclusively for members of regulated professions. While it is formed under the Alberta Business Corporations Act, it is also governed by rules and policies from the applicable professional college or association.
Key characteristics include:
- Only licensed members of the same regulated profession may be shareholders and directors.
- The corporation can ONLY provide services related to that profession.
- The Articles of Incorporation must include restricted professional purpose clauses.
- A professional college must approve the corporation’s name and structure before or after incorporation (varies by profession).
- A professional corporation permit must be obtained annually from the regulatory body.
Examples of professions that qualify:
- Physicians & Surgeons (CPSA)
- Dentists (ADA&C)
- Lawyers (Law Society of Alberta)
- Chartered Professional Accountants (CPA Alberta)
- Optometrists
- Psychologists
- Chiropractors
- Pharmacists
- Veterinarians
- Professional Engineers & Geoscientists (APEGA — Permit to Practice)
Because these corporations are highly regulated, they must follow strict requirements regarding naming, ownership, voting rights, and business activities.
What Is a Regular (Standard) Corporation in Alberta?
A regular Alberta corporation, sometimes referred to as a general or standard corporation, is much more flexible and accessible. It is governed solely by the Alberta Business Corporations Act, without oversight from professional regulatory organizations.
Key characteristics:
- Anyone can own shares, including individuals, holding companies, or investors.
- No restricted purpose clause is required.
- No professional permits are necessary.
- Broad business activities are allowed, including trade, retail, services, and investments.
- No restrictions on directors’ qualifications.
Regular corporations are ideal for most businesses not governed by a professional regulatory college.
Key Differences: Professional Corporation vs Regular Corporation
Below is a detailed comparison of the most important distinctions.
Liability Protection
Professional Corporation Liability (Regulated Professionals)
A professional corporation provides:
- Limited liability for business or operational debts
- No liability protection for professional negligence or malpractice
Regulated professionals remain personally responsible for:
- Malpractice
- Professional misconduct
- Violations of college standards
Regular Corporation Liability
A regular Alberta corporation provides:
- Limited liability for all business-related matters
- No professional negligence liability issues, because regular corporations do not provide regulated professional services
Both types offer business liability protection, but professional negligence is NOT shielded by a professional corporation.
Tax Treatment
Understanding tax differences is crucial – especially for high-earning professionals.
Corporate Tax Rates
Both professional and regular corporations benefit from Alberta’s competitive small business tax rate if they qualify.
Small Business Deduction (SBD)
Professional corporations may qualify for the Small Business Deduction, allowing income to be taxed at a lower rate, significantly reducing the tax burden.
Tax Deferral
Professionals earning high income benefit from:
- Leaving profits inside the corporation at lower tax rates
- Deferring personal tax until funds are withdrawn
Income Splitting Rules
Professional corporations face stricter rules:
- Only individuals actively involved in the business may receive dividends (varies by federal rules)
- Family income splitting is limited
Dividend vs Salary Flexibility
Like regular corporations, professional corporations can:
- Pay dividends
- Pay salaries
- Use a combination for tax planning
While both structures offer tax planning benefits, professional corporations are specifically optimized for long-term income deferral and retirement planning.
Ownership & Share Structure
Professional Corporations
- Only licensed members of the same profession may hold voting shares
- Some colleges restrict any outside ownership
- Shareholders must be approved or recognized by the regulatory college
- Family members may own non-voting shares in some professions, but rules vary
Regular Corporations
- Shares can be owned by anyone
- No restrictions on voting or non-voting shares
- Investors, partners, or holding companies can participate freely
Professional corporations have significantly tighter ownership rules.
Regulatory Oversight
Professional Corporations
Subject to both:
- Alberta Corporate Registry
- Professional regulatory college
Annual Requirements:
- Corporate Annual Return
- Professional Corporation Permit Renewal
- Compliance with college rules
- Use of restricted professional purpose
Regular Corporations
Subject only to:
- Alberta Corporate Registry requirements
No additional permits, approvals, or regulatory supervision.
Naming Rules
Professional Corporation Naming Rules
Must include:
- The profession (e.g., “Medicine,” “Law,” “Dentistry”)
- Surname of the professional (varies by college)
- “Professional Corporation”
Examples:
- John Doe Medical Professional Corporation
- Smith Dental Professional Corporation
Naming must be approved by the regulatory college.
Regular Corporation Naming Rules
Must include:
- A distinctive element
- A descriptive element
- A legal ending (Ltd., Inc., Corp.)
No profession-specific requirements.
Permitted Activities
Professional Corporations
- May only provide services within the regulated profession
- Some passive investment activities are allowed
- No unrelated business activities permitted
Regular Corporations
- Can engage in any lawful business
- No restrictions on additional business interests
Tax Advantages of a Professional Corporation in Alberta
A Professional Corporation in Alberta offers several important tax advantages, including:
- Tax deferral through retained earnings
- Eligibility for the small business tax rate (subject to federal restrictions)
- Corporate savings access for retirement planning
- Potential investment income in the corporation
- Flexible compensation planning (salary vs dividends)
However, income splitting is more limited due to federal tax reforms.
Liability Differences in Detail
Professional corporations DO NOT protect regulated professionals from:
- Professional negligence
- Errors or omissions
- Breaches of ethical standards
Only business liabilities (leases, loans, contracts) receive limited liability protection.
Regular corporations do not have these restrictions because they do not involve professional conduct oversight.
Professional colleges can still:
- Investigate
- Discipline
- Suspend or revoke licenses
- Enforce ethical standards
This remains entirely separate from corporate liability protection.
When a Professional Corporation Is the Better Choice
A professional corporation is ideal when:
- You are a doctor, dentist, lawyer, accountant, optometrist, psychologist, pharmacist, chiropractor, or veterinarian
- You expect high personal income
- You want long-term tax deferral
- You plan to grow your professional practice
- Your regulatory college encourages or requires incorporation
You want formal business structure and succession planning
When a Regular Alberta Corporation Makes More Sense
A regular corporation is better suited for:
- Entrepreneurs
- Retail businesses
- Construction companies and trades
- Consultants who are not part of a regulated profession
- Startups and tech companies
- Businesses that plan to seek investors
Regular corporations offer maximum flexibility in ownership and business activities.
Comparison Table
| Feature | Professional Corporation | Regular Corporation |
|---|---|---|
| Who Can Own Shares | Only licensed professionals | Anyone |
| Regulated By | Corporate Registry + Professional College | Corporate Registry |
| Naming Rules | Strict, profession-specific | Standard AB rules |
| Restricted Purpose Clause | Required | Not required |
| Professional Negligence Liability | Not protected | Not applicable |
| Business Liability Protection | Yes | Yes |
| Tax Planning Options | Higher strategic options | Standard options |
| Annual Requirements | Corporate return + College permit | Corporate return only |
Common Mistakes to Avoid
Here are the most frequent errors we see:
- Choosing a name that violates college naming rules
- Filing for incorporation before obtaining college approval
- Incorrect ownership structure
- Missing restricted professional purpose clauses
- Forgetting annual professional permits
- Assuming professional corporations protect against malpractice
We help prevent every one of these errors through a guided process.
Why Business Alberta Online Is the Best Platform to Register a Professional Corporation in Alberta
At Business Alberta Online, we specialize in helping professionals incorporate correctly, efficiently, and in full compliance with Alberta’s regulatory framework.
Why professionals trust us:
Profession-Specific Expertise: We understand the unique requirements for physicians, dentists, lawyers, CPAs, engineers, and other regulated professions.
Fully Compliant Articles of Incorporation: We prepare restricted-purpose clauses that satisfy both the Alberta Business Corporations Act and your professional college.
Naming & NUANS Guidance: We ensure your proposed corporate name meets college and Corporate Registry rules.
Proper Share Structure Setup: Structured exactly according to the regulations of your profession.
Regulatory College Coordination: We guide you through any required pre-approval or post-incorporation requirements.
Fast, Digital Filing: We handle the entire process electronically for maximum speed.
Error-Free, Rejection-Proof Preparation: We eliminate the mistakes that cause delays and extra costs.
Transparent, Affordable Pricing: No hidden fees, no confusion – just efficient, compliant incorporation.
We’re committed to making the incorporation process smooth, accurate, and fully aligned with professional regulatory standards.
FAQs:
1. What is the main difference between a professional corporation and a regular corporation?
Professional corporations are restricted to licensed professionals and regulated by their professional college; regular corporations have no such restrictions.
2. Can a professional corporation have non-professional shareholders?
Generally no, except for limited non-voting shares depending on college rules.
3. Does a professional corporation protect against malpractice?
No. Professional negligence remains fully personal.
4. Do professional corporations receive tax advantages?
Yes, they allow tax deferral and corporate savings but have limitations on income splitting.
5. Do I need a professional college permit?
Yes, after incorporation, a professional corporation permit is required.
6. Can a professional corporation hire employees?
Yes, including administrative staff and associates.
7. Can I convert a regular corporation into a professional corporation?
Generally no, you must form a new professional corporation.
Understanding the differences between a regular corporation and a Professional Corporation in Alberta is essential for choosing the right structure for your business. Professional corporations offer significant tax planning opportunities, specialized governance, and added business credibility, while regular corporations provide greater flexibility and broader ownership possibilities.
For regulated professionals, incorporating properly—and in full compliance with your college’s rules – is non-negotiable. At Business Alberta Online, we make the entire process seamless. From naming approval to restricted-purpose Articles of Incorporation and regulatory permits, we ensure every step is correct, compliant, and stress-free.
Start your Professional Corporation in Alberta today with Business Alberta Online – fast, accurate, and fully compliant registration for regulated professionals.