Incorporating your medical practice generally allows you to take advantage of the federal small business deduction on up to $400,000 of active business income earned in the corporation. Depending on the small business rate in your province and your personal marginal tax rate, retaining income in your professional corporation and deferring personal tax at a shareholder level could allow you to defer up to 30% of tax. As a result, your professional corporation may have a greater ability to save or to repay business debt.
Additionally, in all provinces except Alberta, certain non-physician family members can be shareholders of your professional corporation. Paying dividends to adult family members in a lower marginal tax bracket than you could reduce your family's overall tax payable.
However, incorporation involves setup and ongoing administration and compliance costs. In addition, the benefits of incorporation may be limited for certain medical practice arrangements. If you think incorporation might be for you, you'll want to discuss the feasibility and costs with your tax and legal advisors before proceeding.
Incorporation milestones
Your MD advisor can discuss the pros and cons of incorporation with you, to help you make the right choice for your practice.
