Published on August 27, 2014
Posted in: Blog
Many doctors and dentists have taken advantage of the ability to practice using a medicine professional corporation or a dental professional corporation. These professional corporations are set up largely for tax purposes and present an effective opportunity for doctors and dentists to split their professional income with immediate family members.
The ability to utilize the professional corporation rests in the hands of the licensed practitioner; the doctor or dentist must be the sole voting shareholder, officer and director of the corporation. Upon the death of the licensed practitioner, his or her estate trustee is tasked with the administrative matters unique to estates of doctors and dentists practicing through professional corporations.
Assuming the shares in the professional corporation are not being sold to another licensed practitioner in the same field, the first order of business will be to determine whether the corporation will be wound up or not. The estate trustee’s decision as to whether or not to wind up a professional corporation will need to be made in consultation with a tax advisor as the ultimate duty to the beneficiaries requires a careful analysis of the merits of each option.
In the event that the estate trustee elects to continue the existence of the corporation, certain amendments will need to be made to transform the corporation from a professional corporation to a regular corporation. Articles of Amendment must be filed and the estate trustee will need to address the following issues:
- The name of the corporation will need to be changed by removing the word ‘professional’ from the name of the corporation;
- The objects of the professional corporation will have been limited in the Articles of Incorporation such that the corporation could not carry on any business other than the practice of dentistry or medicine or a related business. As the continuation of a practice by the professional corporation following the death of the doctor or dentist is not be permitted, this restriction will need to be removed from the Articles and a general objects provision be substituted;
- As the deceased doctor or dentist would have been the only officer, director and voting shareholder of the professional corporation, the estate trustee will need to attend to the appointment of other persons to these offices and roles; and
- The shares of the deceased doctor or dentist will need to be transferred in accordance with the terms of the will.
For more information about the administration of estates for health professionals, you can contact the lawyers in our Private Client group.