Advantages of Incorporation

Physicians in Canada are generally well-advised to incorporate. The size of their income “fits” very well to the low-rate incentives offered to all businesses (13.5% on pre-tax corporate income, to a maximum of $500,000 per year).

If your personal living expenses amount to something less than your actual annual income, then incorporation can save you significant taxes. The difference, being your annual savings, can be accumulated inside the corporation, in an investment account of some sort. Some prefer to accumulate in the professional corporation itself, but the preferred approach is to do so in a dedicated holding corporation (keeping the accumulating income hopefully free of concerns and issues that can ‘orbit’ an active business – especially in a relatively high-risk activity, such as health care).

Can’t save any money? Well, perhaps one reason is that your college-age children are busy spending a good portion of what you make! In such a case, corporations can still work to save you taxes. There might not be any significant accumulation of cash, but with the combined effect of dividends allocated from a properly-designed family trust, or via discretionary, special-purpose classes of shares in the corporation, we can ‘engineer’ a situation where your children effectively end up declaring income that would otherwise have been declared by you, at no, or very low, tax cost overall.

We can also advise on the often-misunderstood advantages of a fiscal period that is not the calendar year. Most of our physician-clients take advantage of this very useful and practical method of maintaining control over budgets, and tax burden. Our objective: never having to tell you that you need to find $25,000 by the end of the week (for taxes). We can provide a system for avoiding that kind of bad news – and it all revolves around budgets and projections of the future. While that can be very difficult for many businesses, the medical profession is often quite easy to budget. We can show you how.

Taking Hold of your Savings Objectives and Strategy

We like to encourage clients to think of their holding companies as their ‘retirement funds’. Developing an enthusiasm for saving and investing is one very useful side-effect of the use of holding companies. In fact, we can assist and consult on the matter of management of the accumulating money. All too many professionals turn their savings over to high-cost money managers, whose remuneration is masked by the way they can charge your investment funds, directly. We encourage our clients to consider alternatives – perhaps even managing the money themselves, through discount brokerages and the like. We appreciate that such a notion is often received negatively, because the average person considers investment to be a very scary and risky proposition. Thus, they end up overpaying for investment advice. It pays to discuss the alternatives with us – we’ve seen a lot of different approaches to this challenge. And the best part: we’re impartial, and unbiased. All we can do is charge you for our time. Whatever financial product or investment you buy is up to you, and makes no impact on what we are paid. That’s why Lohn Caulder Chartered Accountants are the No. 1 trusted advisor in our client’s lives.

Tax Credits Available In Some Specialty Areas

Did you know that physicians can make claims for ‘scientific research and development’ tax credits? If you are engaged in some area of medical specialty in which the bounds of medical knowledge are being pushed out, via clinical trials, lab research, learned treatises, etc., or if you have a medical device or process that has been patented or may be patented, it may very well be that your activities will qualify for credit. We have many medical professionals who have successfully made claims, and Lohn Caulder can assist in the process.