The Medical Profession Act has been amended to allow for the incorporation of medical practitioners. While not all medical practitioners will benefit through incorporation, it will be of advantage to many, primarily because of the tax relief it can offer. In this brochure we describe some of the potential benefits that incorporation can provide.

The incorporation of a medical practice is not the same as the incorporation of other businesses as there are many more technical requirements. The articles, share capital and debt structure are significantly different. Mr. Tom Schuck of our firm practices in tax law and belongs to the Canadian Tax Foundation. He has also been a presenter on income-splitting for the Continuing Legal Education programs for The Law Society of Saskatchewan. Should you wish to discuss the incorporation of your professional practice, feel free to contact him or any member of our firm.

BENEFITS OF INCORPORATION
The most significant saving of tax is from income splitting. Income splitting is the transfer of income from a high income professional to a spouse or other adult family member who has low or no income (such as a university student). This transfer of income can be done either through the share structure of the corporation, or through the use of a family trust.

Because active, small business corporations are taxed at 21%, significant savings can be made by the deferral of

taxes paid through a professional corporation and transferred to a holding corporation. Corporate taxes are paid at 21% and, if the funds are not needed immediately, the remaining 79% can be invested. Without a corporation, if the individual is taxed at 50%, there remains only 50% for investment. This is usually referred to as a "deferral" of taxation by reason of the fact that when the funds are ultimately taken out of the corporation, an additional 30% in tax will be paid on the taxation of dividend income.

If one is contemplating the founding or acquisition of a medical practice where substantial borrowing is involved, incorporation will assist the practitioner in retiring the loan sooner by reason of the fact that if taxed at 21% there would be 79¢ on every dollar earned after taxes to service the debt. If the taxes of the medical practice are paid without the benefit of a corporation, and 50% in tax is paid, only 50¢ on every dollar is available to pay down the debt.

Incorporation permits a practitioner to maximize the after-tax receipts from the sale of a medical practice through the utilization of the capital gains exemption.

Corporations are frequently used to protect assets from creditors. Although a professional corporation cannot be protected from claims of patients, it is possible to move other capital assets into a holding corporation that is structured in such a way so as to prevent claims being made by creditors