Hello everybody. I am Jonathan Sears from Sears Chartered Accountants. The topic today is I am a doctor. Should I incorporate?. It seems to be making more and more sense for doctors to incorporate. There are still a few doctors that it doesn’t make sense for, and I’ll tell you why it doesn’t make sense for some doctors to incorporate.
If you are working for just say a hospital, or you have one employer it likely from a legal stand point doesn’t make sense to incorporate because you may be considered what’s called a personal services business. Personal services business- I am going to address in more detail in a later topic, but for now a personal services business is taxed at the highest rate and you are very restricted to the expenses you can have so you never want to be considered a personal services business. I think the biggest advantage for doctors to incorporate is the opportunity to income split. What I mean by income splitting is an opportunity to give funds to children, spouse and parents. Its another way to withdraw the money from the corporation at a lower tax rate.
Very often, the physician’s spouse, parents and children if 18 or above are at a lower tax bracket. This gives you an opportunity to again to get the money out at a lower tax rate. Many tax planning strategies are used by physicians as well, especially if children go to university up to $ 38000 and dividends can be taken out tax free from the corporation for the children and basically they don’t pay any tax if they don’t have any other income. This gives the doctor an opportunity to pay for the child’s education by paying no tax.
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