Pax Law Corporation’s lawyers can assist medical doctors and physicians with incorporating their medical practice. If you wish to retain our services to incorporate your professional medical corporation, reach out to us today:
Incorporation for Physicians
Part 4 of the Health Professions Act, [RSBC 1996] CHAPTER 183, permits individuals who are registered as medical doctors with the college of physicians and surgeons of British Columbia (“CPSBC”) to incorporate a professional medical corporation (“PMC”). Incorporating a PMC creates a new legal entity and allows the physician or physicians who are the shareholders of that corporation to practice medicine through that corporation.
Is It a Good Idea for A Physician to Incorporate?
It can be a good idea for a physician to incorporate their practice. However, like any other decisions, there are advantages and disadvantages to incorporating a practice:
|Ability to defer payment of personal income taxes||Incorporation and permitting costs|
|Lower business liability for the medical practitioner||More complex accounting and higher accounting costs|
|Distribution of income among family members to lower income taxes||Required yearly corporate upkeep|
|Corporate structure allows for more complex and efficient business organization||Managing a corporation is more complicated than a sole-proprietorship|
Advantages of Incorporating for a Doctor
A main advantage of incorporating your practice is the ability to defer payment of your income taxes and lower the amount of income tax you pay by using a corporate structure.
You can defer payment of your income taxes by leaving money that you currently do not need for your living expenses inside the corporation’s bank accounts. The first $500,000 of your corporate income will be taxed at the lower small business corporate income tax rate of approximately %12. In comparison, personal income is taxed on a sliding scale, with the income that is below $144,489 taxed at approximately %30 and any income above that amount taxed at between 43% – 50%. Therefore, if you intend to invest your money while you are working to save for your retirement, your money would go a lot further if you kept it inside a corporate.
You can lower the amount of income tax you pay on the money you decide to take out of your corporation by naming your spouse and other family members as shareholders of your company. If your spouse or family members have less income than you, the income tax they will pay on the money they take out of the corporation will be less than the income tax you would pay if you took the same amount of money out.
A medical corporation would also lower your personal liability for any business expenses you might incur. For example, if you were to personally sign a commercial lease agreement for your practice, you would be responsible for any liability arising from that lease. However, if you sign the same commercial lease contract through your professional corporation and do not sign as a guarantor, only your corporation will be liable under that agreement and your personal wealth will be safe. The same principle applied to claims arising out of disputes with employees, service providers, and other suppliers.
Finally, if you plan to open a practice in partnership with other doctors, incorporating yourself would give you access to a wider range of business organizations and make the partnership easier to set up and more efficient.
Disadvantages of Incorporating for a Doctor
The disadvantages of incorporating for a doctor are mainly concerned with the cost and increased administrative burden of practicing through a corporation. The process of incorporation itself can cost close to $1,600. Additionally, once you have incorporated, you will be required to file income tax returns each year for your corporations in addition to filing your personal taxes. Further, a BC corporation requires certain corporate upkeep performed each year to remain in good standing and changes to BC corporations can require the knowledge and experience of a lawyer.
Do I Need a Lawyer to Incorporate My Medical Practice?
Yes. You need a permit from the College of Physicians and Surgeons of British Columbia to incorporate a professional medical corporation, as a condition of the issuance of that permit, CPSBC will require you to have lawyer sign a certificate in the form required by the CPSBC. Therefore, you will need the assistance of a lawyer to obtain the permit to incorporate your medical practice.
Frequently Asked Questions
Yes. Part 4 of the Health Professions Act of British Columbia permits registrants of the College of Physicians and Surgeons of British Columbia to apply for and receive a permit for a professional medical corporation, which will permit them to incorporate their practice.
Pax Law Corporation charges a legal fee of $900 + taxes + disbursements to incorporate a medical practice. The applicable disbursements in February 2023 will be a fee of $31.5 – $131.5 to reserve a corporate name, a fee of $351 to register the corporation, and approximately $500 in fees to the College of Physicians and Surgeons. The yearly corporation permit fee is $135 for the College.
It means that the medical doctor is practicing as the owner of a professional corporation. This does not affect the doctor’s liability to their patients nor the standard of care they are expected to provide. Instead, it may have tax or legal advantages for the lawyer’s practice.
Depending on the physician’s income and practice, it can be a good idea to incorporate. However, each case is unique and Pax Law recommends you speak with one of our lawyers if you are unsure about incorporating.
The process of incorporating itself can be done within 24 hours. However, the College of Physicians and Surgeons can take between 30 – 90 days to issue a permit, and as such, we recommend you start the incorporation process 3 – 4 months before you intend to being practicing through your corporation.
Time needed:90 days
How to: Incorporate a Physician Professional Corporation
- Obtain Name Reservation
The name you choose must be acceptable to the College of Physicians and Surgeons.
- Obtain Consent from the CPSBC
Obtain CPSBC’s consent for using the name you have reserved and pay incorporation fees to CPSBC.
- Prepare Incorporation Documents
Prepare an incorporation agreement, an incorporation application, and your articles of incorporation in the form acceptable to CPSBC.
- File Incorporation Documents
File the documents prepared in step 3 above with the BC Registrar of Companies.
- Perform Post-Incorporation Organization
Allot shares, create central securities register, and the other documents required for your corporation’s minutebook.
- Send Documents to CPSBC
Send post-incorporation required documents to CPSBC.