The incorporation of a doctor’s medical practice, much like any other type of incorporation, is the legal process by which a company becomes a legal entity in the eyes of the law. Incorporated businesses are treated just as actual people, meaning they may hold liability or assets and even commit crimes. There are several reasons why the incorporation is a valid and beneficial option for many doctors’ medical practices.
One of the largest incentives for the incorporation of businesses (and medical practices) is tax deferral. Though exact numbers differ from area to area, the rate of personal income tax is usually a good deal higher than the rate of corporate income tax. Remember, an incorporated company is treated just as a person, meaning your company is capable of earning money instead of you directly. The money your corporation earns is then taxed lower than if you were earning it as an individual, and you are left with more to invest in capital for the purpose of maintaining and growing your practice.
Income splitting is another option made possible through the incorporation of a doctor’s medical practice. Income splitting is a strategy used to lower the rate of taxation you incur. It is most commonly used when one spouse earns significantly less money than the other. For example, let’s say you own a corporation and make enough money to enter the highest bracket of income taxation, but your spouse earns far less. Depending on how the process is carried out, it may be possible to sell your spouse enough share of the company to split the income from those shares between the two of you. This way, the amount earned by each of you is lower, resulting in a lower bracket for taxation.
Aside from tax deferral and income splitting, the incorporation of a doctor’s medical practice offers a good deal more advantages having to do with ease of stock exchange and personal protection from certain liabilities. For more information about how incorporation could benefit you and your medical practice, contact a business attorney in your area.
If you need help with doctor incorporation in Toronto ON or would simply like more information, feel free to contact us at Grinhaus Law Firm. We offer high-quality legal services, flat-rate pricing, and free consultations. Give us a call today!