Start Saving Money: Dental Professional Corporations For Dentists.
Incorporating Your Dental Prof Corp (PC)
Dentists run small, and sometimes not so small businesses. A dentist operates as themselves as a person or they create company to work through and under. Often it makes good sense for dentists to form dental professional corporations. Dental professional corporations also go by the name of “dental PC”s or “prof corps for dentists”. There are significant differences in how a dental professional corporations are set up compared to regular corporations. The rules impact several aspects of the Dental PC. Failing to do so properly can cause significant issues for you down the line. The corporate lawyers at Kahane Law Office in Calgary can help you understand what you need to know about starting off on the right foot. Call today 403-225-8810.
What Are Dental Professional Corporations?
Dental professional corporations exist as a specific type of corporation that we set up specifically for dentists. Legally, they are a corporate entity like any other. They offer many of the advantages of a corporation (but not all – see below). They are allowed by the Alberta Dental Association and College. In fact, this governing body is legally in charge of permitting dentists to use Dental Prof Corps. As the College overseas all dentists in Alberta, they set out the rules and requirements for a PC. A corporate registry cannot provide you with legal advice or direction to set these up. Our corporate lawyers help you with the key steps needed to satisfy the College and provincial requirements.
Advantages Of Dental Professional Corporations For Dentists
The advantages of dental professional corporations for dentists are largely financial. Usually this is enough incentive for our clients. Unless our dentist clients save money, we, and their accountants, will not move forward. This is why we work closely with our clients and their accounting specialists. Sometimes they also involve their financial planner or tax lawyer, if they have a family trust, in these discussions. Specifically the dental PC allows for significant tax advantages. For example, these advantages include:
Tax Deferral With Dental Professional Corporations
If you are making more money than you are spending, then a dental PC allows you to only pay the corporate tax on funds earned but not used. This is a lower tax rate and you will then only pay personal tax on those funds when they are drawn out of the Dental Prof Corp. Delaying paying taxes allows you to use or invest those dollars until you need them.
Income Splitting For Dentists
If you have a significant other, you can make that person a non-voting shareholder of your PC. These types of shares are set up in your articles of incorporation. Income splitting means that you pay some money from the dental professional corporation to a lower income person in your household. While the federal government attempts to limit income splitting, several legal options still exist. Again, we work with you, your financial planner and your tax specialist to maximize your tax savings.
Dividends For Dentists
Dividends receive different tax treatment and rates than income earnings. There are advantages to paying yourself with dividends, but there are also disadvantages to make sure you talk to your accountant. They determine the best allocation of dividend and income to save you taxes..
Capital Gains Exemptions
There are capital gains exemptions for small businesses in Canada. When you go to sell your dental practice, you may be eligible for this exemption. This means that you may be able to personally receive some of the sale proceeds tax free. Sometimes, you lose these advantages when operating as an individual.
Asset VS Share Sales
If you operate your dental practice as a sole practitioner, you only have the option to sell the assets. If you have a dental PC, you have the option to either sell the assets of the company or the shares in the company. Both have tax, legal and financial consequences. Options always allow for dentists to make the best choice for themselves and their situation.
Tax Write Offs For Dental Professional Corporations
Dental professional corporations are eligible for more write offs than sole proprietorships. By taking advantages of these write offs, you save tax dollars. Talk to your accountant or lawyer to make sure you understand what you are allowed (and not allowed) to write off.
What Dental Professional Corporations Do Not Do
Dental Prof. Corps do not allow for liability protection like other corporations do. This means that a dentists cannot escape personal liability by “hiding behind” their dental professional corporations. This is a legal decision that was made that still allows the advantages of incorporating for dentists but still protects the public by keeping dentists accountable. As this is a significant thing to understand, talk to your lawyers about how to protect yourself from different types of liability that dentists face. Having proper professional and business insurance is key to protecting your personal assets. Talk to your insurance specialist to ensure you have the protection you need for your practice. Also ensure you know your insured risks and what is specifically exuded by your policy.
Start Saving Today: Lawyers to Incorporate Dental Professional Corporations
If you are a dentist in Alberta, the Calgary business and corporate lawyers at Kahane Law Office help with your dental professional corporation’s (PC) legal needs. Always ensure that you set them up correctly the first time to avoid future issues. We also help you properly maintain their legal status to protect your tax savings. We help you to start saving today. Connect with us to learn more or start saving this upcoming tax year. Call 403-225-8810 or email us directly.