Sole Proprietorship or Incorporation is one of the most frequent questions we have been asked during our initial consultation. Introduction We have recently experienced an
Were Your Tuition Credits Completely Used Up from Your School Years?
Healthcare professionals in Canada can incorporate their practice to take benefit of certain tax advantages and liability protections. Medical professionals incorporate can limit their personal liability and potentially reduce their overall tax burden.
As a Medical Professional, you have many years of tuition. If you have yet to use them, they are tracked by Canada Revenue Agency and are available to see on your CRA account. If you still have these credits, they can help you pay off your taxes, delaying the need for incorporation.
Yes, I have put these credits to use already — if you believe it may be favourable to yourself for tax purposes to take advantage of this option, then you can do it.
No, I haven’t used them up — if you have any remaining debts that have been transferred and will carry forward, these may cover the personal taxes you owe, which could postpone the requirement for incorporation.
Are You Working Without a Corporation (Also Known as a Sole Proprietor)?
Yes — You’re currently earning a decent amount of money for your services while providing the services. This setup could permit you to continue operating or incorporate.
No — This depiction suggests that you continue to be at residency or are a staff member being compensated a wage. This arrangement does not permit you to incorporate it at this time.
How Much Remains from Your Budget?
In addition to my living expenses and loan payments, I have a few thousand dollars left over after my payments – If you’re earning more than what’s required by your living expenses, and remaining above that in your earnings, incorporating may be able to assist in reducing your total tax burden on the excess earnings.
After paying living expenses and other money payments onto my student loans, there is hardly any left – Use all your money for your living expenses and loans, and incorporating your business would make it even more complicated to run. The main thing here is that there ought to be leftover earnings in your corporate bank account to offer incorporation a practical meaning.
Have You Taken on Debt to Bolster Your Practice?
Yes — Only your interest portion of your payments is tax deductible. The Flash Pass portion of your loan payments that reduce your balance will be taxed at your current rate. Including this in your company will permit you to make tax savings on the payments, reducing your debts and giving additional money to pay off loans sooner.
No — It’s not essential for medical professionals incorporate to this lesson into their schedule; however, it is something to be mindful of when preparing longer-term goals.
Is Saving a Big Part of Your Long-Term Goals?
Yes — Effectively, a corporation could create long-term personal revenue for you if it keeps funds available. The company can invest those funds within yourself, such as in an investment vehicle not registered towards you. To you, the enterprise can be viewed as a type of long-term revenue plan, just like an IRA or RRSP.
No — Keep in mind that if you’re spending too much money on your lifestyle each month, incorporation may not be a good choice.
Some advantages and disadvantages of incorporation must be considered before a doctor chooses to proceed. There’s no correct or incorrect time to when should medical professionals incorporate. Whether you are a doctor, dentist, pharmacist, or other medical professionals; your situation will be different than that of other medical professionals with whom you graduated or with whom you work. Ultimately, you must make your ultimate decision based on those goals, lifestyles, and priorities that coincide with whatever direction in which you move.
If you are a doctor or physician and are thinking about incorporating, OR if you are already integrated but would like to talk about some of these details, please contact us by phone at (416) 755-3000 or schedule a 15-minute free consultation.
The information is not intended to constitute professional advice and may not be appropriate for a specific individual or fact situation. It is written by the author solely in their personal capacity and cannot be attributed to the accounting firm with which they are affiliated. It is not intended to constitute professional advice, and neither the author nor the firm with which the author is associated shall accept any liability in respect of any reliance on the information contained herein. Readers should always consult with their professional advisors in respect of their particular situations.
— Sami Ghaith
CPA, CGA, MBA