PREC Articles Assessment (O. Reg. 536/20 and Income Tax Act)
Upload or paste your articles of incorporation and we read them against both regimes that govern a PREC: the PREC conditions in Ontario Regulation 536/20 (administered by RECO), and the Canada Revenue Agency rules that decide how the corporation is taxed. You get a rating for each, green, yellow, or red, and every requirement named with what we actually found in your text. It is free, there are no forms to fill in, and the check does not upload your document.
How It Works
Add Your Articles
Drop in your PDF, or paste the text of your articles. The check runs in your browser.
We Read Both Regimes
Your corporate name, the article restrictions, the share classes and the transfer restrictions, tested against the PREC conditions in Ontario Regulation 536/20 (administered by RECO) and the CRA rules on control, income sprinkling, and personal services business.
Get Your Rating
A red / yellow / green result per regime, with any outright contradictions listed first and the requirement behind each gap, emailed to you as a PDF.
Pick Up Where You Left Off
These are the three options from your PREC Articles Health Check. Your scan ran in your own browser, so each option asks you to add your articles again first. Run the check, then choose your option and your articles carry straight across.
Saved your progress on the amendment page before? Pick up where you left off.
PREC Deep Dive
Add Your PREC Articles
Include the share provisions (your share classes and the rights attaching to them), the transfer restrictions, the business and conduct restrictions, and the director and officer provisions. Article numbering varies between article sets, so the scan reads the wording, not the numbers.
Drop your articles here, or browse
PDF (including scanned copies), Word (.docx and .doc), photos of your articles, and .txt files are read for you, right here in your browser.
You confirmed you understand this is an automated tool and not legal advice.
The assessment engine did not load, so the check cannot run. Reload the page. If it keeps happening, your browser or network may be blocking part of this page.
Your articles are analysed entirely in your browser. The check itself does not upload, store, or send the document to Capital Toolkit. If you ask us to email your PDF report, only your clause-by-clause result and your email address are sent to build it. If you also choose to keep your results for 90 days, an encrypted copy of them, your articles included, is saved; only the links in your email can unlock it, and our database never holds the key. We keep a record of the reports we send: your email, name, and the rating band, never your articles or the clause-by-clause results.
PREC Articles Health Check. Prepared —. Automated service. Not legal or tax advice. Not a replacement for your lawyer.
Your Result
Red Light Responses
If you received a Red Light, your articles may contain provisions that could place the PREC offside the PREC conditions, and activities or ownership the articles cannot show may need checking too. Significant consequences may arise if these issues are not corrected.
Option 1
Option 1 is for professionals experienced in PREC compliance, tax, and restructuring who may simply have overlooked a PREC requirement.
Option 2
Option 2 is for professionals who have concluded with their advisors that restructuring is needed before PREC compliance can be completed.
Pro’s Choice
Option 3
Option 3 is for professionals who prefer to address the restructuring and PREC compliance together as one coordinated process.
You do not have to finish in one sitting. On the next page, sign in with your email and we will save your articles and your answers for 90 days after your last change, so you can come back and pick up where you left off.
Options 2 and 3 take the articles you just checked with you, inside this browser tab, so you are not asked for them twice. They are only saved to our servers if you choose to sign in and save your progress there, or ticked Keep my results for 90 days when your report was emailed.
Deep Dive Report Is Ready
Price is in Canadian dollars and is Capital Toolkit’s professional fee. HST is added at checkout and shown before you pay. All sales are final, we do not offer refunds. Nothing here is legal advice, and we will tell you plainly if we think your articles do not need the work.
Where we send your report and receipt.
So we can address it.
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Download This Report
Then correcting the articles should not displace anything. The PREC Deep Dive findings below set out exactly what needs to change; your own corporate lawyer drafts and files the amendment. Worth confirming against your financial statements before you file, if the corporation turns out to hold or earn anything outside providing your services, come back to this.
Then it has to move to a separate corporation, and the order matters.
What the Review Needs from You
Your articles cannot show what your corporation is actually doing. That comes out of your accounts and your filed returns, reviewed line by line against the PREC restriction.
Deciding How the Other Business Should Be Owned
Pros
Cons
Pros
Cons
Questions to bring to your advisor
This is general information, not tax or legal advice for your situation. Neither path is recommended over the other here, since which one fits depends on facts only you and your advisor can weigh.
Regulation and Tax Drafting Issues
One Amendment, Both Regimes
What to Confirm with Counsel
Every Requirement We Checked
Capital Toolkit is an automated service. It provides general information, not legal, tax or accounting advice, and it does not replace your own lawyer or accountant. Have a qualified professional review any document before you rely on it, sign it or file it. This tool performs an automated language scan of the text you provide to show how your articles are drafted. It reads only the file you choose, entirely in your browser. If you ask for the emailed PDF, only your clause-by-clause result and your email address are sent to build it. If you also choose to keep your results for 90 days, an encrypted copy of them, your articles included, is saved, and only the links in your email can unlock it. It reads wording only, so it cannot confirm that the corporation meets the PREC conditions in fact. A PREC is not a “professional corporation” under the Business Corporations Act.
Capital Toolkit · capitaltoolkit.com/toolbox/PREC
What a red result actually costs
If the Structure Is Wrong, the CRA Can Reassess.
Your PREC may be saving you thousands of dollars in tax every year. All of that saving assumes the corporation was structured properly in the first place.
Ontario sets specific conditions for a Personal Real Estate Corporation. Among other things, O. Reg. 536/20 requires that every equity share be legally and beneficially owned, directly or indirectly, by one controlling shareholder, that the corporation have exactly one director who is that shareholder, and that the president be its only officer. RECO publishes its own checklist of the same conditions. Separately, the Income Tax Act decides how the corporation is taxed, and its tests are separate from RECO's.
If the structure is wrong, nothing goes wrong on the surface. The problem does not announce itself. It surfaces when somebody finally looks, and the worst version of that is a CRA audit.
Where the CRA concludes the corporation was not entitled to the treatment claimed, the exposure can include:
- Reassessment of corporate returns you have already filed and closed the books on.
- Loss of the small business deduction on the income that was run through the corporation.
- Personal services business treatment, which is the expensive one: the small business deduction is denied, almost every ordinary deduction is denied with it, and a federal surtax applies on top of the full corporate rate.
- Tax on split income at the top marginal rate on dividends paid to a spouse or child (of any age), unless an exclusion applies, such as a family member actively engaged in the business on a regular, continuous and substantial basis (from the year they turn 18), or a spouse, from the year you turn 65, where the dividend would have been excluded had you received it yourself. The excluded-shares exclusion is not available on PREC shares a family member holds, because it needs shares carrying at least 10% of the votes and family shares in a PREC must be non-voting.
- Interest on the unpaid tax from the original due date, and penalties depending on the circumstances.
- Professional fees to defend the position, and then to fix the structure anyway.
For a Canadian-controlled private corporation the CRA's normal reassessment period is three years from the date of the original notice of assessment, and it can reach further back than that in certain circumstances, including where a return contains a misrepresentation attributable to neglect, carelessness or wilful default. CRA sets out when it reassesses a T2.
On $240,000 of active business income, the gap between the combined federal and Ontario small business rate (12.2% for 2023 to 2025) and the general corporate rate (26.5%) was 14.3 percentage points, about $34,320 of corporate tax a year if the small business deduction is lost. Since July 1, 2026 the combined small business rate is 11.2%, so the gap is now 15.3 points.
Three years of that, 2023 to 2025, is about $103,000 on a reassessment, before interest. Much of it comes back through lower personal tax when the profits are later paid out, but the reassessment is paid first. Personal services business treatment costs materially more again.
Check your articles before anyone else reads them. It takes a minute and it is free.
How the rating works
We first read your articles into facts, the corporate name, the director provisions, each share class, the article restrictions, then test each requirement against the facts that requirement is actually about. A name condition reads the name; a business-scope condition reads the article restrictions. Each requirement gets one of four outcomes.
| Outcome | Meaning |
|---|---|
| Satisfied | Your articles do what the requirement asks. |
| Contradicted | Your articles positively say something that breaks the requirement. This is a defect, not a gap, and it is listed first. |
| Not found | The protective wording is absent. It may be genuinely missing, or drafted in language we did not recognise. |
| Cannot tell | The answer turns on a fact no document can settle, who in fact holds the shares, who in fact is the director, whether a brokerage agreement exists. We say so rather than guess. |
- Green, every requirement the check looks for is satisfied and nothing contradicts either regime.
- Yellow, no outright contradiction of a main condition, but recommended protective wording is missing or unclear, or a lesser requirement is contradicted.
- Red, a main requirement is contradicted outright, the wording for one of the main conditions is missing, or the document could not be read.
The two regimes are scored separately and never averaged. Failing an O. Reg. 536/20 condition puts PREC status or the exemption from registration at risk; failing a CRA one is a tax problem. A strong score on one must not mask a defect in the other. This is a reading of your text, never a legal or tax opinion.
Authorities this check is built on
- Trust in Real Estate Services Act, 2002, S.O. 2002, c. 30, Sched. C
- Ontario Regulation 536/20, Personal Real Estate Corporations, e-Laws
- Business Corporations Act, R.S.O. 1990, c. B.16, e-Laws
- Real Estate Council of Ontario, Personal Real Estate Corporations guidance
- Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.), Justice Laws, including s. 125 (small business deduction and the CCPC condition), s. 120.4 (tax on split income) and the personal services business rules
This tool runs the same assessment engine as the signed-in Capital Toolkit portal. Both grade against identical rules, so a result here and a result there will not disagree.