Incorporation for Medical Professionals
In general, incorporation of your medical professional services is beneficial if you don’t require every dollar of your income to maintain your lifestyle. The primary advantage to incorporation is the ability to defer taxes and accumulate capital within your Professional Corporation.
Effective January 1, 2006, The Business Corporations Act (Ontario) was amended to allow Medical Professional Corporations in Ontario to issue non-voting shares to “family members”. This amendment allowed doctors to income split with family members by issuing their family members non-voting shares of their professional corporation.
Incorporation of your medical professional services may allow you to reduce your overall tax burden as well as defer taxes. Your corporation is taxed at 15.5% on the first $500,000 of active business income, versus your current marginal tax rate of 49.53% (the highest Ontario marginal tax rate for personal income as of 2015).
In addition to a lower tax rate, there are other benefits to incorporation of your medical professional services. Some of these benefits include:
- Utilizing corporate dollars to fund corporately owned life insurance.
- Income splitting opportunities with family members.
- Utilizing the lifetime capital gains exemption on the sale of shares of your Professional Corporation, if applicable.
The above material is for information purposes only and should not be construed as legal or tax advice in any manner whatsoever. Every effort has been made to ensure its accuracy but errors and omissions are possible. Professionals interested in exploring the incorporation of their medical practice should consult with experienced corporate law and tax professionals to discuss their specific needs and circumstances.