WHEN TO INCORPORATE?

CAREER STAGES

It is never too early or too late to benefit from the advantages offered by incorporation.

Before deciding to incorporate, one must take the following factors into consideration:

  1. Annual revenue;

  2. Personal tax rate;

  3. The income of other family members in the household;

  4. Short-term projects (purchase of a home, pregnancy planning etc..)

  5. Short-term plan to purchase or open a clinic

Incorporation and proper tax planning will allow for better tax savings in the short and long term whether you are early in your career or a few years away from retirement (ideally at least 5 years years from retirement).

Incorporation should be considered when your income before taxes (all sources taken into consideration) is greater than your expenses (excluding RRSP, TFSA contributions).

Even though a professional may not be a good candidate for incorporation throughout their career, they should however do so prior to selling a private practice in order to minimize the tax consequences associated with the sale of a medical or dental clinic (see Lifetime Capital Gains Exemption).​

DEBTS AND INCORPORATION

For the most part, and contrary to popular belief, debt is not an obstacle to incorporation. Often, the tax savings realized through incorporation can allow for a quicker reimbursement of debt when properly planned out.

On the other hand, if someone is carrying bad debt (for example, not being able to reimburse the capital on a credit card), it may be preferable to pay such creditors before incorporating.

Debts that do not affect incorporation: Home mortgage, line of credit or low interest loans (student loan, for example).

Debts that impede incorporation: Credit card (only if you are not able to reimburse the entire capital each month), loans at an interest rate that is higher than the market rate (+6%).

Incorporation has many benefits but its timing is crucial. Our tax consultants can help you better assess the optimal time to incorporate your practice.

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