Should a Dentist Incorporate in Ontario?

Many dentists in Ontario reach a point in their career where the question of incorporation comes up, whether it is from an accountant, a colleague, or simply from thinking ahead about taxes and long term planning. Incorporating a dental practice is a significant decision, and it is not the right move for everyone. Still, it is worth understanding what a dentistry professional corporation actually is, and why some dentists choose to set one up.

This article walks through the basics in plain language. It is general information only, and it is not a substitute for advice tailored to your specific situation.

What Is a Dentistry Professional Corporation?

In Ontario, dentists who meet certain requirements set by the Royal College of Dental Surgeons of Ontario may be permitted to incorporate their practice through a dentistry professional corporation. This is a specific type of corporation designed for regulated health professionals, and it works a bit differently than a typical business corporation.

A professional corporation does not change the fact that the dentist remains personally responsible for the standard of care they provide. Incorporation is mainly a business and tax structure, and it generally does not shield a dentist from liability related to the practice of dentistry itself.

Why Dentists May Consider Incorporating

There are a few reasons dentists in Ontario often look into incorporation. The right mix depends on where a dentist is in their career, how the practice is structured, and what their longer term goals look like.

1. Tax Planning

One of the more common reasons dentists consider incorporating is tax planning. Depending on the facts, income earned through a corporation may be taxed differently than income earned personally, and a corporation can sometimes allow for more flexibility in how and when income is taken out of the business. In some cases, this may also open the door to income splitting with family members who are legitimately involved in the business, subject to the rules that apply to this.

That said, the actual tax benefit varies a great deal from one dentist to another, depending on income level and how the practice is run. An accountant and a lawyer working together can help map out whether incorporation makes sense financially.

2. Business Structure and Ownership

Incorporating can also give a dentist more structure around how the practice is owned and operated. A professional corporation can hold assets, enter into certain contracts, and in some cases make it easier to bring in an associate or eventually sell shares of the practice, depending on how things are set up and what the governing rules allow at the time.

There may also be restrictions on who is permitted to hold shares in a dentistry professional corporation, and the rules can change. It is worth speaking with a lawyer before assuming a particular ownership structure will work the way you expect.

3. Succession and Long Term Planning

For dentists thinking about retirement, bringing on a partner, or eventually selling the practice, incorporation can play a role in how that transition is structured. In some cases, having a professional corporation in place ahead of time may make certain succession or sale scenarios more straightforward, though this really does depend on the specifics of the practice and the goals involved.

Dentists who are still early in their career may not see an immediate need for this kind of planning, while others closer to a transition may find that incorporation is one piece of a larger succession strategy.

Things to Think About Before Incorporating

Incorporation is not free, and it is not simple to unwind once it is set up. There are costs involved in setting up and maintaining a corporation, including legal and accounting fees, and there are ongoing filing and record keeping obligations that come with running a corporation rather than operating as a sole proprietor.

It is also worth remembering that incorporation is primarily a business and tax tool, not a way to change your professional obligations as a dentist. Whether incorporation actually makes sense often comes down to your income, your stage of career, your plans for the practice, and how comfortable you are with the added administrative responsibilities that come with running a corporation.

Is Incorporation Right for Every Dentist?

Not necessarily. For some dentists, particularly those earning a modest income or just starting out, the costs of incorporating may outweigh the benefits, at least for the time being. For others, especially those with higher income, an established practice, or specific succession plans, incorporation may be worth serious consideration.

Because every dentist's situation is different, this is a decision that generally benefits from a conversation with both a lawyer and an accountant, who can look at your specific numbers and goals before you make a decision one way or the other.

Frequently Asked Questions

Q: Do all dentists in Ontario qualify to incorporate?

A: Not automatically. Dentists generally need to meet requirements set by the Royal College of Dental Surgeons of Ontario before they can operate through a dentistry professional corporation. Depending on the facts, there may also be restrictions on share ownership. A lawyer can help confirm whether you currently meet the requirements.

Q: Does incorporating protect me from liability if something goes wrong with a patient?

A: Generally, no. A professional corporation is mainly a business and tax structure, and it does not usually shield a dentist from personal responsibility for the standard of care provided to patients. Professional liability considerations are separate from the incorporation decision.

Q: Will incorporating save me money on taxes?

A: It may, depending on your income and how the practice is structured, but this is not guaranteed for every dentist. The tax impact of incorporating varies quite a bit from one situation to another, so it is worth reviewing your specific numbers with an accountant before deciding.

Q: When is the right time to think about incorporating?

A: There is no single answer, since it depends on your income, your stage of career, and your longer term plans for the practice. Some dentists look into it fairly early on, while others wait until they are closer to a transition, such as bringing on a partner or planning for retirement.

Speak With DevLaws

If you are a dentist in Ontario thinking about incorporating your practice, the team at DevLaws can help you understand your options and what the process may involve. Contact us to discuss your specific situation.

contact@devlaws.com | +1 437 290 0424 | devlaws.com

Disclaimer

This article is for general information purposes only and does not constitute legal advice. Every practice and every dentist's situation is different, and whether incorporation makes sense depends on the specific facts involved. If you have questions about your particular circumstances, you should speak with a lawyer.