Gurpreet Sohi, CFA, CFP®
BMO Nesbitt Burns
1959, 152 Street
White Rock, BC
What is a medical professional corporation?
Incorporating your medical practice is an important business decision for your career and personal life. To determine if incorporating is right for you, it is essential to fully understand what incorporation means for all facets of your personal, family, and professional life.
A medical professional corporation is a unique type of business structure that carries on the business of a medical practice. In the eyes of the Income Tax Act, the professional corporation is an independent legal entity, separate from the people who own, control and manage it.
What are the benefits of incorporating?
- Access to a lower tax rate and the benefit of the Small Business Deduction on active income from the medical practice that is earned in a corporation. Personal taxes at higher rates can be deferred until funds are extracted from the corporation.
- Provide opportunity to income split with family members and reduce overall family taxes. In most provinces, adult family members including spouses and children can be made shareholders and receive dividends from the professional corporation.
- Provide an alternative and tax-efficient funding option for postsecondary education through the payment of dividends to adult children who are shareholders of the professional corporation.
- Potentially reduce taxes by drawing from dividends, salary, and other income types through the corporation.
- Provide additional retirement planning options by leveraging the corporate structure.
- Limited business liability – professional liability still exists.
What else should I consider?
- If you have significant personal savings after expenses, retaining funds in a corporation can help you take advantage of the deferral strategies.
- Medical professional corporations are governed by unique rules from province to province - Please reach out to our team for more information.
- There are one-time and on-going costs to operate a medical professional corporation.