Choosing Your Physician Practice Business Structure
Foundation for your medical practice
Structuring Your Medical Practice
Your business structure affects taxes, liability, succession planning, and operational flexibility. The right choice depends on your income level, risk tolerance, partnership plans, and long-term goals. According to the Canadian Medical Association, most physicians with established practices benefit from incorporating as professional corporations.
Each provincial regulatory body, such as the College of Physicians and Surgeons of Ontario or the College of Physicians and Surgeons of British Columbia, has specific requirements for medical professional corporations that must be followed.
The timing of incorporation matters significantly. Incorporating too early wastes money on accounting and legal fees, while waiting too long means missing years of tax deferral benefits. Most advisors recommend incorporating when consistent net income exceeds $150,000-$200,000 annually.
Structure Options
Professional Corp
Tax deferral, income splitting, and corporate investment opportunities for established physicians.
Partnership
Shared ownership and responsibilities with defined profit-sharing and governance agreements.
Sole Proprietorship
Simplest structure for new practices, though limited tax planning and no liability protection.
Holdco Structure
Advanced structures with holding companies for asset protection and succession planning.
Structure Comparison
| Structure | Tax Rate | Income Splitting | Setup Cost | Annual Costs |
|---|---|---|---|---|
| Sole Proprietorship | Up to 53.5% (personal rate) | Limited | $0-$500 | Minimal |
| Professional Corporation | 12.2% (small business rate) | Yes (with restrictions) | $2,000-$5,000 | $3,000-$7,000 |
| OpCo + HoldCo | 12.2% + passive income rates | Maximum flexibility | $5,000-$10,000 | $6,000-$12,000 |
| Partnership | Varies by structure | Per agreement | $3,000-$8,000 | $4,000-$10,000 |
*Rates shown for Ontario. Provincial rates vary. Consult your accountant for current figures.
Common Mistakes
- •Incorporating before income justifies the setup and ongoing costs
- •Leaving excess cash in the operating company instead of protecting it
- •Not considering future partners when drafting initial agreements
- •Failing to properly separate personal and business finances
- •Ignoring provincial regulatory requirements for medical corporations
Keys to Success
- •Work with professionals experienced in medical practice structures
- •Incorporate when net income consistently exceeds $150,000-$200,000
- •Review and update structure as income and circumstances change
- •Plan for succession and exit from the beginning
- •Coordinate structure decisions with overall wealth and estate planning
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Structure Your Practice for Success
The right business structure can save you tens of thousands annually while protecting your assets. We'll analyze your unique situation and recommend the optimal approach.
Let's review your current structure and identify opportunities to improve your tax efficiency and asset protection.