Marc brings with him 10 years experience practicing law and has maintained a general litigation practice throughout his career.  Marc articled with Walsh Wilkins Creighton LLP in 2000.

Marc joins a team of highly-skilled lawyers at Walsh Wilkins Creighton LLP, a firm that has been providing legal services to businesses and individuals in Alberta for over 50 years.

Read more to learn how this change in Alberta law may affect you.

The following professions (“regulated professionals”) are affected by these changes:

• Doctors,
• Dentists,
• Chiropractors,
• Optometrists,
• Lawyers,
• Chartered Accountants,
• Certified Management Accountants,
• Certified General Accountants.

Prior to this Act coming into force, only members of the regulated professions were permitted to hold shares in their respective professional corporations.  Although a professional corporation does not shield professionals from personal liability, the primary advantages of a professional corporation are the income tax benefits that can be accessed, such as income splitting, the small business deduction, access to the capital gains exemption and the deferral of income tax until amounts are paid out to the professional as a shareholder.

The new legislation now adds advantages allowing professional corporations to issue non-voting shares to:

· The regulated professional,

· A spouse or Adult-Interdependent-Partner of the regulated professional,

· A child of the regulated professional, and/or

· A trust, with limitations. [1]

The Professional Corporations Statutes Amendment Act changes how regulated professionals can structure their businesses.  The most significant change is the ability to split income and capital gains with spouses and children, allowing for an over-all tax savings.  By issuing dividends to all shareholders of the corporation, many family members will be taxed at a lower rate than the professional would have been.  In addition, if the shares issued to family members qualify for the enhanced capital gains deduction it may be possible to shelter all, or a portion of, the capital gains that could be realised on sale of the shares.  In order to take advantage of these new opportunities the corporation’s articles of incorporation must allow for the new, non-voting, shares to be issued and must allow for a payment of dividends to the non-voting class of shares.

The total amount of tax savings will vary depending on the structure chosen and the income of each party, however, a basic calculation shows that a spouse or adult child with no income will pay approximately $700 tax on $30,000 of income transferred to them through the professional corporation.

Nevertheless, only some of the advantages available to other Alberta corporations have been made available to Professional Corporations in Alberta.  Holding companies and family trusts are not permitted to hold shares in the professional corporation.  One effect of these prohibitions is that income splitting with minor children, even through a trust, is rendered largely ineffective due to the “kiddie tax” application.

Issuing shares in a corporation also creates risk for the regulated professional that did not exist when the corporation had only one shareholder.  It may be advisable to create a Unanimous Shareholders Agreement to govern how the shares will be dealt with in the event of the death of a shareholder or of marital breakdown.  Another potential issue arises if the professional corporation accumulates significant “passive” assets.  These “passive” assets could cause the professional corporation to become ineligible for capital gains deductions unless the assets are separated from the professional corporation.

In deciding how to use the opportunities created by the Professional Corporations Statutes Amendment Act, some of the factors to consider are:

· The income of the regulated professional’s spouse,

· The effect of tax provisions on the regulated professional’s spouse and children, and

· The corporate structure that will best serve the family’s goals.

Your accountant may have suggestions on how to issue shares to your family members through a traditional estate freeze, a stock split, a Family Limited Partnership, or another method.

The lawyers at Walsh Wilkins Creighton can help you analyse your current structure as either a professional corporation, or as an individual, to help you learn more about your business and income options.

[1] The trust beneficiaries can only be the regulated professional’s minor children, and a beneficiary must, within 90 days of the child’s 18^th birthday, either be removed as a beneficiary or must receive the shares to hold directly.

Lou’s column can be downloaded here: Area Update November/December 2009.

The online version of the AREA Update can be viewed here: AREA Update - September/October 2009 (PDF)

The full version of Ben’s paper is available online, free of charge, courtesy of the Social Science Research Network.

The online version of the AREA Update can be viewed here: AREA Update May/June 2009.pdf

Eugene  graduated from the University of Alberta law school in 1985. He is a member of the Blood Tribe, part of the Blackfoot Confederacy and acted as in-house Counsel to the Tribe from 1986-1994. In 1994, Eugene joined Walsh Wilkins where he assisted First Nations in negotiating claims and agreements and advised in areas of Aboriginal law. In 1999, he became a partner and in 2002 the firm’s name was changed to Walsh Wilkins Creighton LLP.

At the time of his appointment, he was assisting and advising the Blood Tribe in developing its Tribal Justice system with plans for a provincial court on the Blood Reserve and a peace making system.  Eugene has conducted lectures and workshops on Aboriginal issues at the University of Lethbridge and Red Crow Community College. In 1980, Eugene became the first Chairperson of the Blood Tribe Police Commission.

In 2005, Eugene was named the Alberta Aboriginal Role Model in Justice.   In February of 2008, Eugene and his two colleagues, Kenneth R. McLeod and Gary A. Befus were successful at the Supreme Court of Canada in defending the case of The Privacy Commissioner of Canada v. Blood Tribe Department of Health. Eugene was appointed Queen’s Counsel in 2007.

Sources: Alberta Justice Press Release March 18, 2009

Lethbridge Herald March 18, 2009

Calgary Herald March 19, 2009

Calgary Herald March 20, 2009

On March 2, 2009, Bill 20, the Civil Enforcement Amendment Act , was introduced at First Reading in the Legislative Assembly of Alberta. Sponsored by Jonathan Denis, the MLA for Calgary-Egmont, this bill would provide creditor protection for retirement savings and will bring Alberta in line with British Columbia and Saskatchewan.

As it stands, if an individual purchased an RRSP at a bank or credit union (”non-insurance RRSPs”), there is no creditor protection for those retirement savings. Mr. Denis’ bill will amend the Civil Enforcement Act (the “CEA”) such that creditors will not have access to funds in:

a) non-insurance RRSPs;

b) deferred profit savings plans (”DPSPs”); or

c) registered retirement income funds (”RRIFs”).

Creditors will however have access to payments out of the above retirement plans, subject to existing exemptions.

As well, paragraph 4 of Bill 20 will amend the CEA to exempt registered disability savings plans (”RDSPs”) from writ proceedings. RDSPs are intended to help individuals with disabilities and their families to plan for future needs.

Our own Lubos K. Pesta, Q.C. will be contributing a legal affairs column.  This month, Legal Lou takes a look at backing out of construction contracts and cash back deals.