For dental practice owners · Québec
Incorporating an existing dental practice in Québec
You have built a practice that earns well and keeps growing. Incorporating it can lower the tax on the profits you leave in the business today, and open the door to selling it tax-free later.
Two reasons to incorporate
Incorporation does two different things for a practice owner
Most dentists think of incorporation as a way to pay less tax this year. For an established practice, it does two separate things, and both matter: what you keep of your profits now, and what you keep of your sale price later.
53.31% → about 12%
Top personal rate in Québec (2026) compared with the corporate rate on active business income
Keep more of what your practice earns
When you own the practice personally, all of its profit is taxed in your hands. Once it is incorporated, the profit you leave in the corporation is taxed at the corporation's rate first: around 12% on the first $500,000 of active business income, when the corporation qualifies for the small business rate.
The difference stays in the corporation for equipment, renovations, a second clinic or investments. It is a deferral, not a permanent saving: personal tax is paid when you take the money out.
$1,275,000
Lifetime capital gains exemption per individual (2026)
Open the door to selling tax-free
The exemption applies to the sale of qualifying shares of a corporation. When you own your practice personally, you have no shares to sell: you sell its assets, and the exemption does not apply. Incorporating is what gives you shares to sell.
And if your practice may one day be worth more than one exemption can cover, how you incorporate, and whether a family trust shares in the growth from the start, can decide how much of the gain is sheltered.
For illustration only. It assumes your income is already in the top personal bracket and that the corporation qualifies for the small business rate, which in Québec requires, among other conditions, a minimum number of hours paid to employees. Personal tax is payable when the funds are later paid out to you.
01 · Incorporating an existing practice
You own the practice. Your corporation needs to own it too.*
Incorporating an existing practice is different from incorporating as an associate, because you already own an established business with assets that must be transferred to your new corporation.
When an associate incorporates, the corporation simply provides their services and earns their future professional income. The clinic where they work owns the equipment, runs the premises and holds the practice's business assets, so the associate has no clinic to transfer.
When you own and run your practice without a corporation, the business belongs to you personally: physical assets such as dental equipment, furniture and leasehold improvements, and intangible assets such as goodwill, all of which may have built up substantial value over the years. That is why incorporating it takes two distinct steps.
Step 1
Create your professional corporation
Think of your new corporation as an empty basket. You have created a separate legal person, but the business you have spent years building still belongs to you.
The corporation does not become the owner of your chairs, your equipment, your leasehold improvements or your goodwill simply because it exists.
Step 2
Transfer your practice into the corporation
The assets that make up your practice are then transferred to the corporation, so the business can keep operating through it.
Because those assets already have value, the transfer must be properly documented and structured for income tax, usually through a section 85 tax-deferred rollover. The tax is postponed, not eliminated.
Incorporating as an associate
- Step 1: create a professional corporation
- No existing practice to transfer
- The corporation earns future professional income
- No goodwill, equipment or leasehold improvements to transfer
Incorporating as a practice owner
- Step 1: create a professional corporation
- Step 2: transfer the existing practice's assets into the corporation
- The corporation acquires the existing business through a properly structured transfer
- An independent valuation and a section 85 rollover are usually needed
How the assets move into your corporation
Before
You personally own and run the practice, including its business assets.
After step 1
Your new corporation exists, but the practice's assets still belong to you.
During step 2
The assets are transferred under a written agreement, generally with a section 85 rollover when the conditions are met.
After the transfer
Your corporation owns the transferred assets and runs the practice, with the required contractual, regulatory and operational arrangements.
Why the transfer requires an independent valuation
Before the business is transferred, its fair market value must be established, because the amounts in your financial statements do not necessarily reflect what your practice is worth.
Your equipment and leasehold improvements have value, and so does the goodwill you have built through your patient base and earning capacity. An independent valuation establishes the value of the business and its assets, supports the shares the corporation issues to you and is the foundation of the rollover.
It matters even more when the incorporation includes a family trust or an estate freeze, because the value you have already built must be separated from the future growth another class of shares is meant to capture.
Important · GST and QST
The rollover may defer income tax. It does not automatically eliminate GST and QST.*
Transferring an existing practice to a corporation raises two separate sets of tax rules.
The section 85 rollover deals with income tax on the transfer of eligible assets. A separate GST/QST election, made jointly by you and your corporation, may allow the transfer of an entire business without GST and QST on many of its assets.
The election is generally available when the corporation acquires all or substantially all of the property reasonably needed to carry on the practice, and the other conditions are met. If you are registered for GST and QST, for example because you also provide taxable cosmetic services, your corporation must be registered too.
Leasehold improvements are treated differently
Dental equipment and furniture are movable assets. Leasehold improvements, such as treatment-room installations, plumbing, electrical work and partitions, are attached to the premises and may be treated as real property for GST and QST.
The election does not apply to a taxable sale of real property to a buyer that is not registered (paragraph 167(1.1)(a) of the Excise Tax Act, with a corresponding Québec rule). In the common case where you are not registered and your new corporation is not registered either, GST and QST may therefore remain payable on the improvements, even when the election covers the rest of the practice.
Because most dental services are exempt, your corporation generally cannot recover those taxes through input tax credits or refunds. They become a real cost of incorporating, not an amount paid and recovered later. A rebate of part of the tax you paid on the improvements may reduce it (section 257 of the Excise Tax Act and its Québec equivalent).
The valuation, the rollover and the GST/QST analysis must be coordinated before the transfer, so that the tax consequences are known in advance rather than discovered after the incorporation.
* For illustration only. This section and the one before it give a simplified, high-level overview. They do not replace tax planning or a written opinion for your situation, and transferring an existing practice to a corporation raises other considerations not covered here. The actual result depends on the value and legal nature of each asset, the registration status of the parties, the elections made and the rebates available. Obtain tax advice before transferring any asset.
02 · When to incorporate
The right time depends on the value of your practice
Many dentists wait until retirement is close, or until their accountant mentions it. For a practice owner, a different question deserves attention much earlier: what is your practice worth today, and what could it be worth when you sell?
Your practice may grow in value as you build your patient base, improve profitability, expand or develop your team. That growth creates wealth, and it can also leave part of your eventual gain exposed to tax if it outgrows your own exemption.
Annual revenue and fair market value are not the same thing. Two practices with similar revenues can have very different values.
Time to examine your structure
Not because the law requires it, and not because the practice is worth $1 million. At this level, its eventual value may exceed what one exemption can shelter, so the planning should answer two questions:
- Should you incorporate now?
- Should a family trust share in future growth?
A trust generally cannot be added years later to capture value that has already accumulated.
It may still make sense
The decision weighs your income, what you need to withdraw, the value of the business, your expected growth and your sale plans.
The aim is not to incorporate every practice at the same revenue. It is to incorporate when the benefits and the planning opportunities justify the costs and the complexity.
Look at it promptly
Certain rules accommodate the incorporation of an existing business shortly before a share sale, but they depend on the facts.
Other opportunities, particularly a family trust sharing in future growth, may be much more limited.
The earlier you understand the value of your practice, the more options you have.
03 · The capital gains exemption
Your practice could be worth more than your own exemption
For a dentist who has never used it, the exemption may shelter up to $1,275,000 of an eligible capital gain. It is a lifetime limit, not an annual deduction, and it does not make the sale of a corporation tax-free by itself.
It generally requires a sale of qualified small business corporation shares and compliance with ownership, asset-use and other requirements.
A properly structured family trust may allow future growth to accrue for eligible family members, who may in some cases use their own exemptions. That requires careful planning: the professional ownership rules, the trust rules, the tax on split income, the allocation of capital gains and the eligibility of the shares and beneficiaries all come into play. A trust does not automatically multiply your exemption.
04 · The family trust
A trust cannot shelter growth that has already happened
A family trust generally shares in future growth. It does not give beneficiaries access to value that built up before it was established.
The trust shares in the growth that follows
Under a properly structured arrangement, the $1.6 million of growth after the structure is set up may be attributed to the growth shares held by the trust.
Little growth left to share in
If the practice is already worth $2.5 million, a trust can still be added through a reorganization, but a conventional estate freeze keeps that $2.5 million in your shares. If you sell soon after, the trust may have little growth to share in, and shares issued to a trust generally must be held for 24 months before its beneficiaries can claim the exemption.
Should every dentist establish a family trust?
No. A trust adds legal, tax and administrative complexity, and its value depends on:
- The current fair market value of your practice
- The growth you can reasonably expect
- Your expected sale timeline
- Your family circumstances
- The eligibility of the potential beneficiaries
- The ownership rules for Québec dental corporations
- The cost of setting up and maintaining it
The valuation sets the starting point. The structure decides who may share in the growth that follows.
05 · Choosing the structure
Your structure should match the value of your practice and your plans
Some owners need only a professional corporation. Others benefit from a holding company, a family trust or an estate freeze. The right choice depends on your business, your finances, your family and your exit plans.
The professional corporation
The corporation through which your practice operates. It earns the practice income and holds the assets and rights transferred to it, within the legal and regulatory requirements. Its shares may qualify for the exemption when the conditions are met.
The holding company
Useful for certain investment and planning purposes, but not automatically necessary. Intercorporate transactions, the ownership of the professional corporation's shares, passive assets and the eventual sale structure all have tax and regulatory implications.
The family trust
Part of a strategy to allocate future growth and plan succession. Its usefulness depends on timing: introduced when the practice is already valuable, it cannot capture the growth that came before.
The estate freeze
A reorganization that keeps your existing value in one class of shares while future growth goes to another, which a family trust may hold where appropriate. It requires a defensible valuation and attention to the tax and professional ownership rules.
The goal is not the most complicated structure. It is the one that keeps the opportunities relevant to you open.
06 · Incorporating right before selling
Possible in some cases, but not the same as planning early
Dentists are sometimes told they must operate through a corporation for 24 months before selling its shares and claiming the exemption. That is too broad.
Paragraph 110.6(14)(f) of the Income Tax Act provides an exception for shares received in exchange for all or substantially all of the assets of an active business. A dentist who incorporates an established practice shortly before selling may still qualify, but not automatically.
The transfer must meet the requirements
The structure, the assets transferred, the consideration received and the ownership of the shares all matter, and the corporation and its shares must meet the eligibility conditions.
The buyer must agree to buy shares
An incorporation done for the exemption may miss its purpose if the sale ends up being a sale of assets by the corporation.
The family trust opportunity may be limited
Even if your own shares qualify, a newly created trust cannot shelter the value already built up in the practice.
There may be little time to fix problems
Asset composition, structure, contracts and the buyer's requirements can all affect the deal, and close to closing there is little room to correct them.
Incorporating shortly before a sale may be possible. Planning as though you can safely wait until then is a different matter.
07 · Qualifying for the exemption
Incorporation does not guarantee a tax-free sale
The exemption is not granted because you own a corporation. Your shares must be qualified small business corporation shares, which means meeting rules on the corporation's assets, its active business and who owns the shares.
More than 50%
Generally, more than 50% of the fair market value of the corporation's assets must be attributable to assets used in an active business and certain other eligible assets. The rules also govern who may own the shares during that period.
All or substantially all
A stricter test generally applies at the sale: all or substantially all of the value of the corporation's assets must be attributable to qualifying assets.
Why excess cash and investments matter
A dental corporation can build up significant cash or investments, which can affect eligibility. The corporation may need to be purified before its shares are sold, but purifying shortly before closing cannot always repair a failure during the earlier period. A corporation set up correctly today can also run into problems later if its assets, ownership or operations change.
The right incorporation creates the opportunity. Maintaining eligibility preserves it.
08 · The process
How we incorporate an existing dental practice
More than filing incorporation documents: the corporation must be structured correctly, the existing business transferred and the tax consequences addressed.
Review your current situation
How your practice is owned and run, your financial statements, your personal income needs, the current and potential value of the clinic, your retirement or sale timeline, and your family and succession objectives.
Coordinate an independent valuation
Qualified independent professionals establish the fair market value of your practice, the foundation of the transfer and of any share structure.
Design your corporate structure
The share structure, and whether a family trust, a holding company or an estate freeze should be considered, within the professional ownership rules.
Incorporate the professional corporation
We prepare the corporate documents, complete the incorporation and handle the requirements of the Ordre des dentistes du Québec.
Prepare the transfer agreements
The transfer of the practice's assets and rights is documented to reflect the valuation and the intended tax structure.
Address the rollover and GST/QST
We coordinate the federal and Québec tax elections and analyse the GST/QST consequences, with particular attention to leasehold improvements.
Coordinate the operational transition
Banking, the commercial lease or the landlord's consent, supplier and service contracts, insurance, payroll and employer registrations, tax accounts and corporate records.
Establish ongoing compliance
The corporation maintains its legal, tax, accounting and professional compliance and, if a sale is planned, its eligibility for the exemption is monitored.
09 · Timing
Creating a corporation is quick. Transferring a practice takes planning.
The corporation can be created quickly. The whole transaction usually takes several weeks or longer, depending on:
- How quickly your financial information is available
- The time the independent valuation takes
- The complexity of the structure, and whether a trust or freeze is involved
- The professional regulatory requirements and the transfer agreements
- The tax and GST/QST analysis and any third-party consents
Some tax elections also have filing deadlines after the transfer takes effect.
10 · Cost
The cost depends on the business and the structure
An established practice involves more than government fees:
- Independent valuationEstablishing the fair market value of the practice
- Legal and corporate workIncorporation, share structure and transfer agreements
- Tax planning and electionsThe federal and Québec elections
- Trust or estate freezeAdditional work where these structures are appropriate
- Professional requirementsRegistrations, authorizations and related costs
- GST/QSTPossible taxes on certain assets, such as leasehold improvements
- Ongoing maintenanceAccounting, tax returns, records and compliance
A structure that is inexpensive to set up but wrong for your eventual sale can cost far more than careful planning at the outset.
11 · Frequently asked questions
Frequently asked questions
Can I incorporate a dental practice that I have owned personally for many years?
Yes. An established dental practice can generally be transferred to a properly structured professional corporation, subject to the applicable legal, tax and regulatory requirements.
Because the practice already has assets and goodwill, the transfer requires more planning than the incorporation of an associate who is beginning to practise.
Will I have to pay income tax when I transfer my practice?
Not necessarily. A properly structured tax-deferred rollover may allow the transfer of eligible business assets without triggering immediate income tax on certain accrued gains or income.
The result depends on the assets transferred, the consideration received and the tax elections filed.
Why do I need an independent valuation?
Because your practice already has value, and that value must be established for the transfer.
The valuation supports the transfer documents, the tax planning and any proposed share structure. It is especially important when a family trust or an estate freeze is contemplated.
Why could GST and QST apply if the rollover is tax-deferred?
Because the income-tax rollover and the GST/QST rules are separate. An income-tax election does not eliminate consumption taxes.
Certain leasehold improvements or interests may require separate treatment, even where a business-transfer election is available.
Can the corporation recover GST and QST paid on the transfer?
Not necessarily. Most ordinary dental services are exempt from GST and QST, and a corporation providing mainly exempt services may have limited or no right to recover them through input tax credits or refunds.
The actual treatment must be determined from the specific transaction.
Do I need a family trust?
Not every practice owner does. A family trust may be particularly relevant when the practice has significant value and substantial future growth is expected.
Its potential benefits must be weighed against its costs, its complexity and the applicable legal and tax restrictions.
Can I establish a family trust after incorporating?
Possibly, through a corporate reorganization. In a conventional estate freeze, however, the trust participates in future growth rather than in value that has already accumulated.
This is why timing matters.
Does a practice generating more than $1 million in annual revenue need a family trust?
Not automatically. Gross revenue does not determine whether a trust is appropriate.
A practice generating $1 million or more a year may, however, have a value that warrants examining whether your own exemption will be enough when you sell. An independent valuation and a review of the expected growth are the right starting points.
Can I incorporate shortly before selling?
Potentially. Paragraph 110.6(14)(f) of the Income Tax Act allows certain shares received in exchange for an existing active business to qualify for the exemption without being held for a full 24 months.
The requirements are strict and must be examined before the transaction is structured. A late incorporation does not create the family trust opportunities that may have existed years earlier.
Do I have to wait 24 months after incorporating before selling?
Not in every case. The legislation contains special rules for certain transfers of an existing business to a corporation.
Whether they apply depends on the facts and the transaction, and the timing should be reviewed before you enter into a binding sale agreement.
Does incorporating guarantee that I can sell tax-free?
No. Your shares must qualify for the exemption when you sell, which requires compliance with ownership, asset-use and other tax requirements.
The corporation's activities and assets must be monitored over time.
What happens if I accumulate investments inside the corporation?
Excess cash and passive investments can affect whether the shares qualify for the exemption. Depending on the circumstances, the corporation may need to be purified.
Planning should happen well before the sale, because some eligibility tests apply over a period of time.
Can my corporation sell the practice's assets and still claim the exemption?
The exemption generally applies to capital gains on qualifying shares, not to a sale of the business assets by the corporation. The structure of the eventual sale therefore matters.
Can I incorporate now even if I do not expect to sell for ten years?
Yes. For many practice owners, that time is valuable: it allows the business to be structured properly, future growth to accrue within the intended ownership structure and the conditions for a future sale to be maintained.
The decision should still take into account the current tax benefits, the costs and your personal circumstances.
12 · Why Meditax?
Incorporation designed by someone who understands the eventual sale
A practice is not incorporated in isolation. Each decision shapes the next one.
We approach incorporation from both a legal and a tax perspective, with particular attention to the eventual sale of the practice. Me Cathy Nehme holds a law degree from the Université de Montréal and a master's degree in taxation from HEC Montréal, and since 2011 Meditax has worked with dental professionals on incorporation, corporate planning and practice transactions.
We coordinate the independent valuation, design the structure, prepare the legal transfer and handle the tax planning, and we know the questions that come up when a practice is eventually sold.
The right time to think about your exit is not necessarily when you are ready to retire. It may be while your practice is still growing.
The next step
Your practice is growing in value. Your planning should be ahead of it.
If you own a practice and have not incorporated, the first question is not which forms to file. It is what your practice is worth today, how much value it may build and which structure is right before that growth happens.
A professional corporation can be the foundation of a future tax-efficient sale, and a well-timed family trust can add to it. Neither guarantees the exemption: timing, valuation, structure and continued eligibility all matter.
Montréal · Laval · Laurentides · Lanaudière · Montérégie