The Incorporation of Your Dental Practice
Part 1 of 4 : Various Types of Corporate Structures for Quebec Dentists
By Pierre de Boucherville
Since 2008, Quebec dentists may choose to operate within a business corporation, or incorporate their practice. Should you choose to do so?
You certainly have heard before sayings such as: «you should get an incorporation once you make $100k or more» or « it’s easy to get an incorporation: you can get one on the internet, no need for a lawyer or accountant, and it will cost you next to nothing and take 15 minutes».
It is easy to form a business corporation on the internet. But what advice do you get to properly do it? And if you make a mistake, what then?
What’s the real deal here?
Sadly for popular opinions, there are many elements to consider before getting a business corporation created for you, as a dentist: first and foremost, you must decide if you wish to create a corporation under a Quebec charter or a Federal one. The Quebec corporation is a good choice if you plan to do business only within the Province. If your plan is to build a chain of clinics across Canada, a Federal charter is recommended.
This first choice is only the tip of the iceberg.
Depending on your personal situation, present and within a foreseeable future, various types of corporate structures are available to choose from in order to take the most advantage of the many benefits offered by incorporation.
To properly structure your business and personal interests, I can only recommend that you seek advice from an accountant (such as my partner, Rémi Dijoux) or tax specialist who is versed in the most recent developments in tax matters.
Tax rules are constantly evolving: they reflect our governments’ insatiable appetites: a tax strategy which was beneficial yesterday might not be available tomorrow.
This is why I will be happy to put in place a corporate structure for your practice in accordance with the most recent instructions of your accountant or tax specialist.
The different types of corporate structures which have been useful for dentists in the past are:
-the simple or basic structure, which is best for young, single or married but still without adult children dentists, when it is not beneficial for you to split your income with your spouse or your kids : a structure in which you personally own 100% of the shares of a corporation which exploits a dental clinic;
-the professional structure : a good choice to allow income splitting, but for a limited period of a few years; you own 100% of the voting shares of the corporation which runs the dental practice, and your spouse and children own discretionary dividend-participating, non-voting shares under percentages to be defined; please note that as of July 2017, Minister Morneau has proposed legislative changes which would eliminate income splitting for professionals: this matter must be closely monitored;
-the Family Trust structure: if you can split your income with family members for a long-term period: you own 100% of the voting, non-dividend participating shares, and 100% of the non-voting dividend-participating shares are held by a Family Trust, in which you are the fiduciary, and of which your spouse and children are the beneficiaries; please note that as of July 2017, Minister Morneau has proposed legislative changes which would eliminate income splitting for professionals: this matter must be closely monitored;
It is also possible to create a structure in which the shares of the dental corporation are held by a management corporation (or holding). Such a structure allows a tax-free transfer of dividends between corporations, which permits investment opportunities out of the reach of the dental corporation creditors.
DISCLAIMER : Please note that the information contained in our articles does NOT constitute legal advice. It is provided for educational purposes only. Laws are subject to change without notice. The content of our articles may be outdated. If you need legal advice ore representation, please contact Pierre de Boucherville.