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Physicians & Dentists
The importance of incorporating is especially significant for those in the medical and dental professions. Currently, the spouses of doctors and dentists can subscribe to the shares of the professional corporation which would enable the successful application of income splitting.
As there is no limit on the amount of income that can be distributed through dividends, this income splitting is extremely advantageous as the medical and dental professionals can now split their income with their spouses resulting in less tax, thus increasing overall net cash flow. For example, as a result of incorporating and income splitting through dividends, the tax savings are approximately $32,000 on $250,000 of income, based on the dividends being split 50/50 between the spouses.
Quick Facts
The professional corporation may not carry on a business other than the practice of the profession; however, this shall not be construed to prevent the corporation from carrying on activities that are related to, or ancillary to, the practice of the profession, including the temporary investment of surplus funds earned by the corporation.
In general, incorporating protects shareholders in their personal capacities from corporate liability. The professional corporation provisions ensure that personal professional liability of those professionals who choose to operate their practices through a professional corporation will not be limited.
The name of the professional corporation must include the words "Professional Corporation" or "Société Professionnelle" and cannot be a number name.
The professional incorporation legislation allows one or more members of the same profession to be shareholders in a professional corporation. All officers and directors of the professional corporation are required to be shareholders of the corporation.
The governing bodies of regulated professions will be responsible for the certification or licensing of professional corporations that fall under their jurisdiction. In addition, the governing bodies will be able to "look through" professional corporations and hold the professional shareholders accountable for their actions.