On the Professional Corporation, and its quiet pairing with a Holdco.
A PC offers tax deferral but not malpractice immunity, and it answers to a regulator. The Holdco is the instrument that completes it.
What the PC does — and what it does not.
A Professional Corporation gives the owner the tax shelter of a corporation, but not the liability shelter of one.
The professional remains personally liable for their own negligence — the surgeon for the surgery, the lawyer for the opinion, the engineer for the calculation. What the PC does provide is access to the small-business deduction and the deferral edge that comes with it; what it does not provide is a way to put the family’s wealth out of reach of a successful malpractice claim.
“The PC defers the tax. It does not defer the lawsuit.”
The regulator’s line.
A PC is not an ordinary corporation. Most regulators specify, sometimes with great particularity, who may own its voting and non-voting shares. In several Canadian provinces, voting shares of a medical PC must be held by the physician personally and cannot be held by a Holdco; non-voting shares may, in some jurisdictions, be held by family members or by a family trust. Lawyers, dentists, and accountants face their own, differently-shaped restrictions.
The structure that follows must therefore be read as a sketch — a useful default — and not as an instruction. The exact instrument turns on the profession, the province, and the regulator’s most recent ruling.
The pairing.
In the standard pairing, the PC earns the active professional income; surplus is paid out (directly or via trust) to a Holdco; the Holdco invests, holds the corporate-owned life insurance policy, and accumulates the family’s long-horizon wealth. The PC is kept lean by deliberate design — operating cash, no more — so that an action against the professional finds, at most, a year’s working capital, not a career’s worth.
This is the structural argument for the Holdco in three lines: it is where the wealth lives, where the insurance lives, and where the next generation is paid from. The PC remains the practice. The Holdco becomes the estate.
Earns active income. Carries malpractice risk. Owned per regulator.
Receives surplus. Holds investments and the life insurance policy.
Receives dividends from the Holdco. Receives CDA-paid death benefit, tax-free.
To the worktable.
The reading is over. What follows is the worktable — three short instruments that take these arguments and let you measure them against your own situation.
- 01Whether a Holdco may directly own shares of a Professional Corporation varies by profession and jurisdiction. In several Canadian provinces, only licensed members (and in some cases, family members or trusts) may hold PC shares.
- 02U.S. professional structures differ — some states require a Professional Limited Liability Company (PLLC) or Professional Service Corporation, with their own ownership and tax rules.
- 03Family trusts can fill the gap where direct Holdco ownership of the PC is not permitted, subject to attribution and TOSI rules in Canada.