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Is Incorporation Right for Your Medical Practice? Here’s what you need to know.

Active Business Income

Medical Professional Corporation

Compared with paying personal income tax, paying tax through a corporation can offer tax deferral benefits.

Additional Structure

Group practice arrangements (e.g. partnerships) may impact corporate taxes on active business income.

Employee

Salary, bonuses, Registered Retirement Savings Plan room and Canada Pension Plan are factors.

Shareholders

Shareholders with lower income may be able to receive dividends resulting in less tax paid.

Additional Structure

Shareholder options beyond a spouse and children (e.g., trusts) vary by province—as do potential benefits.

Other Financial Benefits

  • Repay debt faster within the corporation.
  • Take advantage of tax credits for scientific research and experimental development.
  • Pay insurance premium deposits using more cost-effective after-tax dollars.
  • Physician business accounts and other corporate banking products may help reduce your operating costs.

Other Financial Consequences

  • Investment income doesn’t qualify for the small business tax rate.
  • As the physician, you remain liable for malpractice.
  • U.S. persons living in Canada must meet controlled foreign corporation and passive foreign investment company reporting requirements and could be subject to U.S. tax reporting requirements.

Ready to Incorporate?

For more information about incorporation, contact an MD Advisor. MD offers personalized and objective financial advice at every stage of a physician’s career—from medical school right through to retirement. Find an MD Advisor near you.

These presentations are provided for informational purposes only and should not be considered investment advice or an offer for a particular security or securities. Please consult your MD Advisor for additional information concerning your specific wealth management needs.

The information contained in this document is not intended to offer foreign or domestic taxation, legal, accounting or similar professional advice, nor is it intended to replace the advice of independent tax, accounting or legal professionals. Incorporation guidance is limited to asset allocation and integrating corporate entities into financial plans and wealth strategies. Any tax-related information is applicable to Canadian residents only and is in accordance with current Canadian tax law including judicial and administrative interpretation. The information and strategies presented here may not be suitable for U.S. persons (citizens, residents or green card holders) or non-residents of Canada, or for situations involving such individuals. Employees of the MD Group of Companies are not authorized to make any determination of a client’s U.S. status or tax filing obligations, whether foreign or domestic. The MD ExO® service provides financial products and guidance to clients, delivered through the MD Group of Companies (MD Financial Management Inc., MD Management Limited, MD Private Trust Company, MD Life Insurance Company and MD Insurance Agency Limited). For a detailed list of these companies, visit md.cma.ca. MD Financial Management provides financial products and services, the MD Family of Funds and investment counselling services through the MD Group of Companies. MD Financial Management Inc. is owned by the Canadian Medical Association.

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