| |
|
 |
| DENTAL/MEDICAL INCORPORATIONS A properly setup medical or dental practice and planned estate is essential to the long-term well-being of a practitioner and his/her family. In certain circumstances, savings on income earned can be realized above and beyond what would be the case if one merely took a salary as a partner of a medical or dental practice. Depending on one's level of income, there can be many benefits to incorporating. Whether or not it is in your interest to incorporate, will depend on how you see your future prospects and/or your current level of income. Dividend income (the money a shareholder of an incorporated practice will take out of the practice) is taxed at a much lesser rate than income taken as a salary. It must be remembered however, that an incorporated practice also pays separate tax. In other words, you will be taxed on both the dividend income and income that the corporate entity earns. Nevertheless, if one has a busy practice the total amount of tax paid between dividend and corporate taxes will often be significantly less than one would pay if he/she simply took salary. The actual doctor or dentist must be sole director of the company and a holder of common shares which enable you to vote regarding company issues. Nevertheless, other classes of shares may be issued such as a ìpreferred classî, etc. that permit participation in companies profits. In other words, holders of this class of shares may have a right to participate in income from the company but will be unable to have a say in what the company does. Often this class of shares is held by a spouse or in some circumstances a separate incorporated holding company for which profits can be sent to. If these shares are held by a spouse, and the spouse generally earns less income than the doctor or dentist, then the existence of a class of preferred shares allows an income splitting of sorts whereby some profits of the medical/dental incorporation can be realized by the spouse at a much lower tax rate therefore resulting in savings. Often an accountant will recommend a special holding company be incorporated to take certain profits of the medical incorporation. The holding company again may hold a certain class of preferred shares. In some circumstances, accountants are recommending a Family Trust be established which will hold shares of a holding company that inturn holds preferred shares of the medical incorporation. The corporate structure can in some circumstances seem confusing but once it is properly set up it is easy to administer and can result in tax savings. As a doctor or dentist, you certainly take your patients best interest to heart and have carefully considered your education which has lead to your success in reaching the profession of your choice. It is important that you also give as much care and concern to the establishment of your practice structure. A properly established practice can lead to savings over the years that can compound and become significant. We would be happy to talk to you at anytime and give a without obligation consultation. At AULD ALLEN , we have assisted many physicians and dentists practising throughout the province in respect to incorporation and set up of the legal structure of their practice. We will assist in liaisoning between yourself and your accountant, financial advisor and banker. We can incorporate your company, prepare partnership agreements that might be necessary and properly complete necessary transfer agreements in relation to existing practices that will be merged to a newly incorporated medical/dental practice. J. Gordon Allen & Greg Auld |
 |
 |