Incorporating Medical Professionals
Incorporating medical professionals is a key for many physicians. Whether the physician is a recent graduate or an established physician, there are a number of benefits to having a medical professional corporation ( or “MPC”). A medical professional corporation allows a physician to create a separate legal entity, one that can own assets, incur liability, and limit personal liability.
To incorporate an Medical Professional Corporation, a medical professional must first incorporate an Ontario corporation and follow the College of Physicians and Surgeons of Ontario’s specific guidelines. Then, an application to the College is required. If the College approves the application, then it will issue a Certificate of Authorization to the professional corporation.
Physicians can enjoy numerous taxes benefits through a professional corporation. Although physicians should seek advice from an accounting professional, generally MPCs create tax savings through income splitting. Professional corporations allow the retained money to be reallocated to certain family members, including spouse, adult children and minor children, in trust.
Additionally, professional corporations allow physicians to hold their money in a corporation, instead of receiving it at a high personal tax rate. Since many physicians are subject to the highest marginal personal income tax rate, a professional corporation can act as a vehicle to retain income. The result can be a significant overall tax savings. The medical professional can then withdraw the retained income when it is required, like for example during retirement. To learn more about the specific tax benefits and drawbacks to incorporating, contact your financial professional.
If the corporation has received proper legal advice during the incorporation process, then medical professionals with a flexible share structure can pay dividends to one or more shareholders, cancel shares, or issue special shares for the transfer of assets relating to the practice when it deems suitable. It is also important that the professional retains complete control of the corporation.
Prior to incorporating, medical professionals should survey the assets in his or her current practice. Once incorporated, generally the physician should no longer hold the assets personally, rather they should be transferred to, and held by, the corporation. However, physicians should also keep in mind that MPCs generally may create more paperwork and result in higher fees.
The College of Physicians and Surgeons of Ontario does not provide legal, accounting or other advice to MPCs. Therefore, it is advisable to seek an independent review of your business affairs with your legal professional in order to assess whether incorporation is right for you.
Conduct Law is an Ottawa based business law firm with locations in Ottawa, Barrhaven, Kanata and Winchester. Our professionals are experienced business lawyers who can help with commercial real estate, liens, incorporations, trademarking or implementing corporate structures that manage tax obligations, whether as a corporation, partnership, family trust, testamentary trust, or any other type of legal entity.
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