Physicians, pharmacists, dentists, and numerous other health professionals may incorporate their practice in accordance with the laws and regulations set out by their respective professional orders. For example, since 2007, physicians registered on the Roll of the Order of the Collège des Médecins du Québec may practise their profession within a corporation, or a limited liability partnership. Dentists may also exercise their profession through these two business enterprise framework.
It is of paramount importance to respect the rules and regulations set out by your professional order. Our experience vis-a-vis the various legal orders governing health professionals enables us to provide you with effective and high-quality legal services.
Our clientele of health professionals is composed principally of the following:
- Optometrists; and
- Other health professionals.
MÉDICALOI also performs work for other professionals, such as accountants and lawyers, in order to reduce their respective tax burdens.
Health professionals looking to incorporate their practices may wish to consider the following vehicles as an addition to the structure of their enterprise:
1. Professional corporation
The face of your practice, the professional corporation, serves as the vehicle through which a health professional exercises their profession.
It is through this vehicle that health professionals receive their remuneration from the Régie de l’assurance maladie du Québec (“RAMQ”), private clinics, insurance companies, and/or from patients directly, as the case may be.
The professional corporation (not to be confused with the partnership) is taxed at a preferential tax rate, which gives it an attractive advantage vis-à-vis other forms of business enterprise frameworks.
We usually advise, depending on your circumstances, to isolate your personal investment from your professional corporation, particularly for future tax and estate planning purposes, hence the importance of a holding corporation.
2. Holding corporation
Often an important piece of the puzzle, the holding corporation serves as the vehicle through which a health professional invests excess income not required for the operation of their practice or their personal lifestyle.
If the situation of the professional merits its inclusion, whether as part of the corporate structure or as a distinct structure, we will work in conjunction with our client’s accountant and financial advisor to determine the optimal legal framework for various investment vehicles using excess income generated by professional activities.
Typically, such investments will include real estate property, which requires additional planning which can be complex in nature. Furthermore, the holding corporation is usually an important element for the retirement plans for our clients.
If you are interested in real estate investment, be sure to inquire about our real estate investment strategies and investment groups, specifically tailored for health professionals!
3. Discretionary Family Trust
Discretionary family trusts (“DFT”) are used extensively for tax and estate planning purposes, as they provide significant flexibility and tax-planning benefits.
While numerous financial benefits are associated with setting up a DFT, the most common use of the DFT consists of the holding of assets.
DFTs may also be an attractive addition to a corporate structure in situations where there are family members who are earning high incomes, or who own a wide range of assets (including corporate shares).
It is important to note that important changes were made to tax legislations with respect of income splitting, including through DFTs. However, the DFT may still be of vital importance to a health professional’s corporate structure, particularly in the context of an anticipated sale of a clinic, and further with respect of estate planning.
Please contact us for more information.
If you are interested in incorporating your practice, the first step is to ensure that incorporation will, in fact, be beneficial in your particular situation. During the course of an in-depth analysis conducted by our firm, often jointly with your accountant, we will look at your financial and personal circumstances to determine if and when you should incorporate your practice.
In certain instances, our clients have called upon our firm to reorganize their corporate structures as a result of having skipped this first and other vital elements of the incorporation process. We have seen corporate structures that are either too complex or too simple given our client’s personal and financial situation.
Changes in political climates and tax laws also impacts the complexity of a health professional’s corporate structure. Therefore, a tailored legal and accounting approach becomes necessary to ensure that our clients’ specific needs are adequately attended to.
At MÉDICALOI, we like to simplify matters for our clients by providing them with our Preliminary Intake Form with the aim of gathering the information necessary to establish the most optimal corporate structure for our clients.
In addition, we ask our clients to undertake, with their accountant and financial advisor, a series of exercises prior to our first meeting in order to have a more meaningful discussion. In general, the exercises can be summarized as follows:
- The determination (or estimate) of your annual income, and, if applicable, that of your spouse or partner;
- The preparation of a monthly household budget;
- The determination of major expenses to be incurred within the next 5 to 10 years;
- The listing of all financially dependent family members (children, parents, and siblings for example);
- The preparation of a list of assets and debts. For debts, further determine when they are due. While your debts are not necessarily an obstacle to the incorporation of your practice, a debt repayment schedule should be contemplated, and therefore, becomes an important factor to consider. Consequently, a detailed analysis of the debt by your accountant and financial advisor is recommended; and
- The determination of professional situation, (whether you are beginning, growing or acquiring, stable, or winding down).
Equipped with the Preliminary Intake Form and the information from the foregoing exercises, we will work with your accountant and financial advisors to develop a professional game-plan and a corporate structure tailored to your specific needs. This game-plan will evolve with you throughout the various stages of your professional career and personal life.
At MÉDICALOI, we believe in equipping you with knowledge. We want you to understand what we have done for you, why we have done it, and how our strategy will change and adapt to your career as you move forward in life.
The legal planning required behind the incorporation of a health professional’s practice can become quite complex. Our overarching goal is to ensure that our clients understand the legal reasoning behind the advice we provide, and to ensure that our clients are comfortable with the proposed structure and why it is beneficial in their particular situation.
This learning process is ongoing and begins during the first meeting, which serves as a starting point in the establishment of a relationship of support and advice at every step of your career.
Given the financial and personal information provided for in the Preliminary Intake Form and the exercises, we will outline the corporate structure that is the most suitable for you, the whole while considering present and future needs.
In many instances, our clients have already incorporated their professional practice, but may not have received detailed legal planning advice. In such cases, we are often called upon to review the current structure during our first meeting, and to propose, if needed, modifications to ensure that our client is meeting their objectives and maximizing their potential tax savings. This is particularly important when a health professional is looking to:
- Protect their assets;
- Add a partner to their practice;
- Expand a practice or purchase another practice;
- Sell their practice;
- Purchase real estate and other investment property; and
- Plan for the transition of accumulated wealth from one generation to the next (estate planning);
Our personalized approach enables us to walk you through the incorporation process, and to further provide post-incorporation legal and career/practice-management services.
After the first meeting, we generally like to divide the professional incorporation process into 4 sub-steps.
1. Incorporation, registration, and organization of the professional entity
This step is the actual incorporation and registration process with the relevant government authorities, such as the Registre des Entreprises du Québec.
Following the confirmation of incorporation and registration, we then proceed to organize a corporate minute book for your signature.
The organization of your corporate minute book is an essential part of the incorporation process and serves as a historical overview of your corporate activities. The minute book further documents the life of your professional entity, including major changes such as: reorganizations, acquisitions, sales and other contractual matters that may arise.
We often receive questions regarding the necessity to create and maintain a corporate minute book. Here are just a few reasons:
- It is required by law;
- It serves as a historical overview of your corporate history, and is your first line of defense in the event of a government audit;
- It can be extremely helpful in the securing of funding, whether from investors or financial institutions; and
- It is usually one of the first items requested in the event of the sale of a business, and often further provides details as to the care and diligence with which a professional has operated their practice.
Simultaneously with the creation of a minute book, corporate tax numbers must be obtained for the newly created entity. While some of our clients choose to have their accountants obtain these numbers, we are often called upon to complete this sub-step as well.
From a practical perspective, it is at this same stage that we typically advise our clients to begin the process of opening corporate bank accounts, obtaining corporate credit cards, and ordering corporate cheque books. We will further provide instructions for the payment of shares held by the shareholders, as the case may be.
We will be going over all of this in detail during our first meeting.
2. Professional Orders
The next step is to obtain permission from your professional order to practise your profession through the entity we have just created. Unfortunately, this is one of the longest steps in the process.
If you receive payment from the RAMQ for services rendered, the next step consists of registering the appropriate corporate administrative accounts with the RAMQ in order to ensure that payments are received in the appropriate business account, and not into your personal account.
4. Professional liability insurance
The final step in the professional incorporation process is to inform your liability insurance carrier, such as the CMPA or FARPODQ, of the fact that you will be exercising your profession through a legal entity.
- The creation and maintenance of an up-to-date corporate minute book
The minute book generally contains a copy of the:
- Articles of incorporation;
- Articles of amendment filed;
- Resolutions of directors and shareholders;
- By-laws of the corporation;
- Changes to officers, directors and shareholders;
- Minutes of meetings;
- Unanimous shareholder agreements; and
- Shares and transfer register, amongst other things.
Finally, the minute book must be updated at least once a year;
- The filing of current and annual declarations to relevant government authorities, including major changes to your corporate structure relating to officers, directors, shareholders, head office address and addresses at which you practise your profession;
- The creation and maintenance of a corporate file with your professional order, including the submission of annual declarations to your order indicating changes in your corporate structure, officers, directors or shareholders, and/or changes to addresses relating to your professional activities;
- The payment of annual fees, both at the professional order and relevant tax authority; and
- The filing of income tax returns.
Did you know that…
If you need help finding a buyer for your clinic, or if you are looking for a clinic to purchase, MÉDICALOI can help! We have an inventory of clinics that are either for sale or for purchase.