VETERINARIAN INCORPORATION
Contact our law firm for your incorporation legal work at 403-400-4092 / 905-616-8864 or Chris@NeufeldLegal.com
The incorporation process for veterinarians is dependent upon their jurisidiction, with Ontario veterinarians who are members of the College of Veterinarians of Ontario (CVO) can incorporate a professional corporation and attain an CVO Certificate of Authorization, whereas Alberta veterinarians who are members of the Alberta Veterinary Medical Association (ABVMA) might incorporate a corporation and attain an ABVMA Permit for the corporation. Whether as a professional corporation or a corporation authorized by the veterinarians' governing body, the corporate structure serves to optimize business operations and realize the potential tax advantages available therefrom. When utilized by veterinarians, the corporate construct is subject to specific restrictions and obligations as a result of being regulated by the veterinarians' governing body (i.e., CVO, ABVMA) and applicable corporate legislation, which permits veterinarians to structure their business operations in a corporate structure, while remaining personally liable for claims arising from their own professional negligence or malpractice.
A veterinarian's corporation / professional corporation offers significant tax advantages for high-earning veterinarians, primarily through tax deferral. By incorporating, veterinarians 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 The corporation's income is taxed at two levels, once at the corporate level and then again when funds are withdrawn by the shareholder, but this low initial tax rate allows a veterinarian to retain and invest a larger pool of after-tax capital inside the corporation. This deferral is maintained until the veterinarian 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, a veterinarian's corporation / professional corporation can facilitate several other tax planning opportunities. Income splitting is a key strategy, allowing a 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 corporate structure can also be a vital tool for long-term wealth building and estate planning. Specifically, the shares of a corporation may be eligible for the Lifetime Capital Gains Exemption (LCGE) upon their sale or deemed disposition, allowing a veterinarian 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 corporation a foundational element of tax and financial strategy for veterinarians.
A veterinarian's corporation / professional corporation also enables a veterinarian to access significant retirement and compensation planning arrangements that are not available to non-incorporated entities. A corporation is permitted to establish sophisticated, tax-advantaged retirement plans, such as defined benefit pension plans or profit-sharing plans, allowing veterinarians 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 corporation serves as a comprehensive financial and operational platform. As such, a veterinarian's 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 veterinary practice.
At Neufeld Legal, we have the experience and insight to assist you in structuring your professional veterinary practice as a corporation (in Alberta) or a professional corporation (in Ontario), and addressing pertinent corporate law matters thereafter. Contact our law firm when looking to incorporate as a veterinarian and for other corporate legal services at 403-400-4092 (Alberta), 905-616-8864 (Ontario) or via email at Chris@NeufeldLegal.com.
