Your personal life is busy, and your professional life is demanding. Like so many other healthcare professionals, you likely find yourself consumed with growing your practice, ensuring the well-being of your patients, and spending time with your family. Most likely, you simply aren't able devote the time necessary to properly manage the details of your financial affairs. While you're spending time doing what's most important to you, we help to manage your wealth.
We work closely with other relevant professionals to create a personal wealth management team. As well, when needed, my clients are connected to a vast network of skilled lawyers, accountants, and other financial professionals so expert advice is never more than one phone call away. Through this focused, personalized service we provide many wealth management services that other advisors do not in order to create a holistic, comprehensive plan that integrates your family and your practice.
Frequently Asked Questions (FAQs)
1. How do I get funds out of the professional corporation tax effectively?
You have the choice of sending dividends to yourself and all adult family members (including spouse, children aged 18+, and parents) that are listed as shareholders on your Articles of Incorporation. The advantage of paying dividends is that they are taxed more lightly than earning the income as salary, and there is no maximum amount that can be sent out in dividends.
You may also pay reasonable salary to family members based on work done for the professional corporation – the salary needs to be seen as reasonable by the Canada Revenue Agency. For example, paying your spouse $80,000/year to occasionally do some administration may be difficult to argue as being reasonable. Paying family members a salary allows them to make RSP contributions because it is deemed earned income.
2. What can I invest in with the surplus funds left inside my corporation?
You may want to avoid interest-bearing investments because other investments receive more beneficial tax treatment – interest is taxed more heavily than capital gains or dividends. Ideally, investments that grow via capital gains, dividends or return of capital are the most tax-efficient to hold within your corporate account because the corporation is not a tax shelter.
We have started to use mutual funds that have a patented means of allowing your funds to grow inside fixed income products but pay out via return of capital, dividend tax credit, capital gains, or compound growth – not interest. So for the fixed-income portion of your corporate portfolio, you can maintain the lower risk/return objective of fixed income but avoid the higher tax treatment of earning interest.
3. Can I hold real estate within my professional corporation?
Yes, you may hold a medical office or strata-units within your professional corporation as assets of your practice. You may also hold other non-personal use properties inside the corporation in order to diversify your investments. If you are looking to build a real estate portfolio speak to your tax advisor about Holding Companies or another corporate structure.
4. I'm close to retirement; does professional incorporation still make sense for me?
Possibly, you may still be able to realize some benefits, such as income splitting, lower taxes payable by paying yourself in dividends, and holding certain life insurance policies corporately. It will be important have a conversation with us and your tax advisor.
5. Isn't a professional corporation just a simple corporate entity which either my accountant or a general lawyer can create for me?
No. A professional corporation is a complex legal entity; you need specialists who are experienced in this particular area to help you with this tax strategy in order to ensure it is done properly. We only use experienced tax counsel to create these complicated corporations.
For example, we often come across healthcare professionals' corporations whose share structures are done incorrectly or they are holding improper assets within their corporation.
Contact us if you would like a complimentary review of your Articles of Incorporation by one of our independent tax advisors, who specialize in professional corporations.
6. Does my professional corporation protect me from professional liabilities?
No, your professional corporation will only protect you from CMPA areas.
7. Should I transfer all of my life insurance policies into my professional corporation?
Most life insurance policies can be held within the professional corporation, but it is important to identify the type of policy and the best method of placing it within the corporation. Significant benefits may be lost if you move current policies into the corporation and it is not done correctly. Contact us for an unbiased, comprehensive insurance review.
8. Should I update my estate plan once I have incorporated my practice?
Yes. It will be important to identify tax planning strategies and beneficiary designations for the pool of assets that will be building within your corporation.
9. I'm too busy right now to incorporate my practice – can't I do this later and make it back?
No, you could be making a big mistake. We are often able to save healthcare professionals $15,000 - $30,000 per year in tax savings – that is a huge opportunity cost of not making the time to do it now. There are many strategies we employ to help our clients benefit from significant tax savings every year, including tax deferral, income splitting, moving life insurance inside their corporation, dividends instead of salaries for all adult family members, and many more.
Our initial, complimentary consultations are generally only one hour…how much is an hour of your time worth? Is it worth potentially saving $15,000 - $30,000 per year? It probably is. Contact us to set up your consultation today.
10. How does Russell MacKay of RBC Dominion Securities get paid?
No different than how you're already paying your current investment advisor or banker – through the products you chose to use. My goal is to ensure that we set-up a personalized investment portfolio that matches yours and your family's short and long term goals. This may mean that we get paid per transaction (trading fee), trailer fees from mutual fund companies (paid to us by fund companies, not paid by you, the investor) or fee-based portfolio management fees which vary according to the total assets we manage for you and may be partially tax deductible. There is no one fit for all clients and often they may have one or more of the different account types listed above.
The goal is to find what fits for your needs and make adjustments as needed.