ONTARIO MEDICINE PROFESSIONAL CORPORATIONS
Contact our law firm for your incorporation legal work at 905-616-8864 or Chris@NeufeldLegal.com
Physicians (medical doctors) who are members of the College of Physicians and Surgeons of Ontario (CPSO) may seek to optimize their business operations through corporate structuring and the potential tax advantages available through a Medicine Professional Corporation. An Ontario medicine professional corporation is a legal construct, much in the way of other commercial companies, though having specific restrictions and obligations as a result of being regulated by the CPSO, and in turn the Business Corporations Act (Ontario) and the Regulated Health Professions Act, 1991, that has been enacted to permit physicians (medical doctors) to structure their business operations into a medicine professional corporation (remaining personally liable for claims arising from their own professional negligence or malpractice).
A medicine professional corporation offers significant tax advantages for high-earning physicians (medical doctors), primarily through tax deferral. By incorporating, physicians can shift their active business income from the high personal marginal tax rates to the lower corporate tax rates, especially the preferential Small Business Deduction (SBD) rate on the first $500,000 of active business income. This creates a substantial tax gap between what would be paid personally and what is paid corporately on retained earnings. The medicine professional corporation's income is taxed at two levels, once at the corporate level and then again when funds are withdrawn by the shareholder, but this low initial tax rate allows a doctor to retain and invest a larger pool of after-tax capital inside the corporation. This deferral is maintained until the physician chooses to withdraw the funds as a salary or dividend in a future year, often in a lower personal income bracket, such as during retirement.
Beyond the core benefit of tax deferral, medicine professional corporations facilitate several other tax planning opportunities. Income splitting is a key strategy, allowing a medicine professional corporation to pay reasonable salaries to family members for services they provide to the business, utilizing their lower marginal tax rates (although subject to specific limitations). Furthermore, the medicine professional corporation structure can also be a vital tool for long-term wealth building and estate planning. Specifically, the shares of a medicine professional corporation may be eligible for the Lifetime Capital Gains Exemption (LCGE) upon their sale or deemed disposition, allowing a physician to shelter a significant portion of the capital gain from taxation. This combination of initial tax deferral, income distribution flexibility, and terminal capital gains relief makes the medicine professional corporation a foundational element of tax and financial strategy for physicians (medical doctors).
Medicine professional corporations also enable doctors to access significant retirement and compensation planning arrangements that are not available to non-incorporated entities. A medicine professional corporation is permitted to establish sophisticated, tax-advantaged retirement plans, such as defined benefit pension plans or profit-sharing plans, allowing doctors to contribute substantially more to their retirement savings on a pre-tax basis than is possible through simpler personal contribution vehicles. Combined with the ability to offer generous, tax-deductible fringe benefits and structured employee compensation packages, the medicine professional corporation serves as a comprehensive financial and operational platform. As such, a medicine professional corporation provides a blend of liability mitigation, tax optimization, financial planning tools, and structural credibility that is essential for a high-earning, long-term professional medical practice.
At Neufeld Legal P.C., we have the experience and insight to assist you in structuring your professional medical practice as a Medicine Professional Corporation in Ontario. Contact our law firm when looking to incorporate a professional corporation at 905-616-8864 or via email at Chris@NeufeldLegal.com.
