Incorporating your professional practice

Many provinces allow professionals to incorporate their practice. Professional incorporation can confer many of the same tax and non-tax advantages enjoyed by other incorporated self-employed persons. However, professional liability will not be limited through incorporation and, in many provinces, the shareholders of professional corporations are required to be members of the same profession.

One key benefit of incorporation is the fact that corporations enjoy a considerably lower tax rate on income up to a certain amount (see Table 1 of the Corporate Taxation tables). However, this benefit is only realized if the income is kept in the company. Therefore, incorporating may not be in your best interest unless you’re able to retain some of the income within the corporation. It may also be advantageous to incorporate if you’re planning to sell all or part of your business. In those provinces that allow non-professionals to own shares in a professional corporation, income splitting is also a benefit.

If you wish to incorporate your practice, you should consult your provincial governing body for the conditions of incorporation specific to your profession. Your tax adviser can assist you in determining whether incorporation would be beneficial, given your specific situation.