In order to incorporate your medical practice it is always advisable to obtain advice from a public accountant and lawyer as the process can become complex and unintended tax consequences may arise if proper care isn’t taken. Each of these professionals will be responsible for different aspects of the process but should work together to ensure your needs and goals are met.
Name your Medical Professional Corporation
The first step is to determine the name of your professional corporation. You must follow certain criteria set out by The College of Physicians and Surgeons when determining a name for your professional corporation. When you incorporate your professional corporation, you must decide the type of shares you would like to issue and who is going to own the shares. There are restrictions imposed on both of these decisions as well.
The next step is to set up a shareholder agreement and employment agreement. As I have mentioned in previous blogs, the professional corporation is a distinct entity from you and it is imperative that you have these agreements in place. These agreements detail the responsibilities of the individual and the corporation.
You are now ready to apply to the College of Physicians and Surgeons to operate your professional practice through the corporation. You must receive consent from the College before income is earned in the professional corporation. The approval process typically takes approximately three weeks to be approved.
Once you have received consent from the College, you must transfer the net assets from your professional practice to the corporation. This includes items such as; accounts receivable, inventory, equipment, accounts payable or loans. For some physicians the assets may be very minimal while for others who are running a family practice, it may be substantial. The one asset that may be complicated to value is the goodwill of your practice. The transfer of the assets does not create taxes to you personally provided the required tax elections forms are filed.
In order to finalize the transfer of the assets to your professional corporation you need to prepare a purchase and sale agreement and file certain tax election forms with the government.
In the next blog, I will discuss the yearly filing requirements with due dates for the medical professional corporation.