The idea of setting up a corporation normally starts with a discussion with your accountant, colleagues, friend, family member, portfolio manager, or individual you trust.
The main person that sets the corporation up is a lawyer. More specifically, you would want to talk to a lawyer that does business law.
Typically, the process would unfold with your accountant recommending a law firm that can assist with the overall corporate set up and structure.
Legal advice
It is important to have a good lawyer to assist with the set up if you feel you may have additional needs in the future outside of setting up the operating company. For example, you may want the shareholder structure to enable to have authorized shares that are not issued. In the future you may want the flexibility to set up a holding company or a family trust and these authorized shares may be required. It is easier to have this set up in the beginning.
Types of corporations
The two broad types of operating companies that our clients have are either a standard corporation or a professional corporation. A standard corporation can be formed by almost anyone. A professional corporation can generally only be established by licensed professionals in certain fields which include medical doctors, dentists, engineers, lawyers, accountants, etc.
Regulatory guidance
In British Columbia, the licensed professionals noted above do not have to incorporate; however, it is generally advised that they do. If these regulated professionals choose to incorporate, they must do so as a professional corporation.
One of the benefits of incorporating is that except for limited circumstances, it protects the owners or shareholders from certain liability.
For example, in a standard corporation situation, if the owner is sued for wrongdoing, the business owner’s personal assets are safe. In a professional corporation, professionals are shielded from liability for non-professional acts, such as a defaulted loan.
The primary difference with a professional corporation, is the professional licensee remains liable for their own professional acts, such as when a patient is injured because of a doctor’s negligence or error.
Professional corporations
Professional corporations typically have additional costs to set up and maintain the company. The corporation may face greater scrutiny around the accounting records and may be required to obtain a certificate of authorization for the professional corporations from their applicable regulatory body. Below we have outlined the process for both dentists and doctors.
Dentistry corporations
Dentists are required to get a permit from British Columbia College of Oral Health Professionals (BCCOHP) before practising dentistry under a corporate name. There are several steps:
1. Review Part 14 of the BCCOHP bylaws available online. Section 14.05(3) deals with health professional corporation naming requirements.
2. After the name has met the requirements of the bylaws, apply to the B.C. registrar of companies to reserve the proposed name.
3. Complete the Dentist Application for Approval of Health Care Professional Corporation Name form. The processing of this step alone can take up to six weeks.
4. Apply to the B.C. Corporate Registry to obtain consent to incorporate.
5. Pay the $200 application fee to the B.C. College of Oral Health Professionals. Payment can be made by cheque, money order, or online by credit card.
6. Once the above steps are completed, dentists must apply for a dental corporation permit. Three documents are requited to be completed: Dentist Application for Health Profession Corporation Permit, Dentist Acknowledgement of Shareholder, and Certificate of Solicitor with notary seal.
It is also a requirement to renew the permit annually to ensure that BCCOHP has up-to-date information about oral health professionals who are practising through a health profession corporation. You will receive a notice from BCCOHP when it is time to renew your permit. The annual renewal fee is $100 per corporation.
Medical doctor corporation
Doctors are required to get a permit from the College of Physicians and Surgeons of British Columbia (CPSBC) before practising under a corporate name. Below are the recommended steps:
1. Determine eligibility. Applicants must be a practising registrant registered in the full, special, osteopathic, provisional, academic, administrative, conditional or restricted class of registration.
2. Ensure the proposed corporation’s name is in accordance with Section 6-4 of the CPSBC bylaws, which deal with corporate name requirements, and apply to the B.C. registrar of companies to reserve the proposed name.
3. Apply for a medical corporation permit and pay the applicable fees the second step. The college estimates the processing time to be approximately two to three weeks. The current application fee is $350 per registrant and the annual permit fee is $135 per corporation.
Once the application fee is received and the application is processed, CPSBC will email both the primary shareholder and the business letter assisting with the set up of the corporation. The email will be written consent to facilitate the incorporation.
5. Once the written consent from CPSBC is received, a business lawyer will assist with the application to incorporate. This is done through the B.C. Corporate Registry. The business lawyer will typically email the post-incorporation document to the shareholder and CPSBC, along with all supporting documentation.
6. CPSBC will issue an electronical copy (no hard copies as of April 26, 2023) of the medical corporation permit after it receives the incorporation documents. Annually, doctors must renew the permit, and pay the annual permit fee (currently $135 per corporation) to ensure CPSBC has up-to-date information for the professional operating through a professional corporation.
Doctors of BC
The Contributory Professional Retirement Savings Plan (CPRSP) is a benefit that has been negotiated between the Doctors of BC, the medical staff associations and the B.C. government. The benefit is available to all physicians who have Fee for Service and/or Sessional income, and/or payments received under a non-salaried Service Contract.
The Contributory Professional Retirement Savings Plan provides funds to physicians for their retirement. CPRSP has two components: Basic benefit and Length of Service (LOS) benefit.
The maximum CPRSP benefit available for 2023 is $12,600 (Basic $6,900 and LOS of $5,700).
Each fall, Doctors of BC calculates a CPRSP benefit for physicians to claim via its website.
Historically, statements were mailed to clients and we could get consent from clients that was provided to Doctors of BC to be able to send us this information. Today, the only way to get the CPRSP details is for the member to log onto the website and access the details. All claims are also done online by the member now.
The CPRSP basic and LOS benefits are for retirement savings. They is calculated annually to encourage B.C. physicians to save annually/regularly toward their retirement.
Physicians do not need to attach RRSP/TFSA deposit documentation with the online claim; however, they may be selected to provide proof of contribution to Doctors of BC at a later date. If proof is required, we will respond directly to Doctors of BC on our clients’ behalf. We encourage our clients to take full advantage of this program, as early as they can — certainly before retirement.
Retired professionals
BCCOHP registration year runs from April 1 each year until March 31 the following year. The renewal period opens each February for the following year.
Dentists are required to maintain a minimum number of hours of mandatory continuing education (CE) in order to renew registration to practise each year.
The quality assurance cycle (QAP) is assigned at the date of registration and runs on a three-year calendar cycle. When we are preparing total wealth plans for dentists, we will obtain the date of registration and factor in both the QUP and renewal period when choosing a retirement date.
CPSBC registration year runs between Jan. 1 each until Dec. 31. Payment of dues must be done before the end of February the following year. Registrants are required to attest that they are compliant with the requirements of either CPSBC or College of Family Physicians of Canada (family practitioners). Registrants also have the ability.
There are few items that need to be factored into the retirement decision, including dues, continuing education, and whether any benefits (i.e. CPRSP) still need to be claimed. Once the decision has been made to no longer practice, then the type of corporation must change – the professional corporations must be converted to a standard corporation.
Portfolio Manager
When the professionals that we work with are transitioning to retirement it is important to plan in advance. Ensuring that this is done in a tax efficient manner involves communication with both your accountant and portfolio manager.
Is it possible to sell shares of the company and qualify for the Lifetime Capital Gains Exemption? Has a holding company already been set up previously?
In some cases, the professional corporation may be sold, wound down, or converted to a standard corporation. In retirement, where the assets held are passive (for example, investments and real estate), the standard corporation would be classified as a holding company as opposed to a operating company.
There is often a significant amount of wealth that transitions during this retirement period from equity in a practice to cash that requires investing. In all cases, when a client is no longer practising, incoming cash flows and deposits cease.
Setting up the cash outflows is normally done through a monthly systematic withdrawal (SWIP) which is determined as part of a total wealth plan.
Meeting with a Portfolio Manager ensures the wealth accumulated, in all types of investment accounts (standard/holding corporation, registered retirement savings plan, tax free savings plan, and non-registered), are generating tax efficient cash flow for retirement — a key component to the next stage of life.
Kevin Greenard CPA CA FMA CFP CIM is a Senior Wealth Advisor and Portfolio Manager, Wealth Management with The Greenard Group at Scotia Wealth Management in Victoria. His column appears every week at timescolonist.com. Call 250.389.2138, email [email protected], or visit greenardgroup.com.
