Broadly, incorporating starts to make sense once you can consistently leave roughly $50,000 or more a year inside a corporation — income you earn but do not need to spend on your personal life. If you draw out nearly everything you make to cover living costs, incorporating usually will not save you much.
That single threshold is the heart of the decision, but it isn’t the whole story. The rules that govern a medical corporation, what it costs to run, and how sales tax applies all shape whether the move is worth it for you. Here is how the framework works, keeping in mind that the specifics depend on your income, your province, and your own plans.
What a medical professional corporation is
A medical professional corporation is a corporation a physician sets up to run their practice through, rather than earning all of their income personally as a sole proprietor. Instead of billing and being paid directly, you bill through the corporation, and the corporation pays you.
It is still a corporation in the ordinary legal sense, but it is subject to extra rules set by each province and by the provincial medical regulator, usually called a college. Those rules limit things like who can own the shares and what the company is allowed to do. Because of that oversight, a medical professional corporation is not quite the same as incorporating an ordinary small business.
When incorporating is worth it
The general rule of thumb is roughly $50,000 or more a year in retained income — money you leave inside the corporation rather than drawing out to live on.
The reason is tax deferral. Income you keep in the corporation is taxed at a low corporate rate now, and the rest of the tax bill is deferred until you eventually pay that money out to yourself. If you spend everything you earn, there is nothing left inside the company to benefit from that lower rate, so the advantage largely disappears. The bigger and more consistent your retained income, the more the structure tends to work in your favour.
What makes a medical corporation different
College approval and the certificate of authorization
Setting up a medical corporation involves more than the usual legal incorporation. On top of registering the company, you generally need approval from your provincial medical regulator, and you must obtain a certificate of authorization (sometimes called a permit) that allows the corporation to practice medicine.
This college step is separate from the legal paperwork and takes its own time. In many provinces it adds roughly 4 to 8 weeks on top of the legal incorporation, so it is worth starting early if you have a target date in mind.
Who is allowed to hold shares
Provinces restrict who can own shares in a medical corporation. As a general rule, the voting and controlling shares must be held by the physician, so you keep control of the company that carries your licence.
There is often limited scope for family members to hold certain non-voting shares, but the details vary a great deal by province — some allow it in specific forms, and others are more restrictive. Because this affects both control and how income can be shared, confirm the current rules in your province before you plan around it.
The small business deduction on the first $500,000
The main tax advantage comes from the small business deduction (SBD), and it works at two levels. Federally, the SBD lowers the tax rate on the first $500,000 of active business income, which includes your medical income, to 9%. Each province and territory then applies its own lower small business rate on top of that, up to its own income limit: $500,000 in most of the country and $600,000 in Saskatchewan. Together, the combined rate is roughly 9% to 12% depending on where you practise, compared with personal marginal rates that climb much higher at similar income levels. The provincial portion is the part that changes most often. Ontario lowered its small business rate on July 1, 2026, and Quebec lowered its rate for taxation years beginning after April 29, 2026, bringing the combined rate in both provinces to 11.2% for corporations that qualify.
A few conditions affect how much of that limit you can actually use. It’s shared among associated corporations, and the federal limit can be reduced if the corporation earns significant passive investment income. In Quebec, the reduced provincial rate also requires the corporation to pay for at least 5,500 hours of work a year, so a physician without staff may not qualify for it. The CRA’s small business deduction page sets out the federal rules. For current provincial rates, check your province’s finance ministry or tax authority, for example Ontario or Revenu Québec.
That gap is what creates the deferral advantage. Money taxed at the lower corporate rate leaves more capital inside the company to invest or pay out later, rather than being taxed at your top personal rate the moment you earn it.
What it costs to set up and run
The structure is not free, and the costs run in both directions. Setting up typically costs roughly $2,500 to $5,000 in legal and incorporation fees, plus a provincial college fee for the certificate of authorization that varies by province — which can be a few hundred dollars in many cases.
After that, running the corporation adds ongoing costs — commonly around $3,000 to $7,000 a year in accounting, bookkeeping, and corporate filings. Weigh those recurring costs against the tax savings you expect, because if your retained income is modest, the fees can eat up much of the benefit.
What incorporating does not do
Incorporating does not create tax savings out of thin air, and it saves you nothing if you draw every dollar out to live on. The advantage exists only on money you leave inside the corporation, where it can be taxed at the lower corporate rate and then invested or paid out later.
Put simply, a medical corporation is a tool for deferring tax on income you don’t need right now. It is not a way to lower the tax on money you are spending this year.
How sales tax applies to medical services
Sales tax works differently for physicians than for many other businesses. How it applies depends on the kind of work you do.
Services that are exempt
Most core medical services provided by a physician — consultations, diagnosis, and treatment for medical purposes — are exempt. That means you do not charge sales tax on them.
There is a trade-off, though. You still pay GST/HST on what you buy for your practice — office supplies, equipment, rent, software — like any other business. But because your medical services are exempt rather than zero-rated (taxed at 0%), you generally can’t claim input tax credits to recover that tax. For a practice made up mostly of standard patient care, the sales tax you pay on expenses is simply a cost of doing business.
The taxable exceptions
Some work is taxable. The common examples are cosmetic procedures done for non-medical reasons, and certain medico-legal, expert-witness, or consulting work that is not treatment of a patient.
You must register for GST/HST once your taxable billings exceed the $30,000 small-supplier threshold, either in a single calendar quarter or over four consecutive quarters. Only taxable work counts toward that threshold. Exempt medical billings don’t, so a physician can bill large amounts for standard patient care and still have no obligation to register. Once registered, you charge GST/HST on your taxable services and can claim input tax credits on the expenses tied to them. If you do a meaningful amount of cosmetic or consulting work, review this with your accountant so you register at the right time. The CRA explains the threshold.
Paying yourself: salary or dividends
Once you incorporate, you choose how to pay yourself — salary, dividends, or a mix of the two — and each option has different consequences for tax, for how much registered retirement savings room you build, and for pension and payroll contributions. This is a detailed decision that deserves its own discussion, and we covered it more fully, so treat the choice as a separate step rather than something to settle in passing.
Can the corporation invest or hold real estate?
Yes, retained earnings can be invested inside the corporation, which is a large part of why physicians incorporate in the first place. There is a catch worth knowing: passive investment income earned inside the company is taxed differently from active medical income, and above certain amounts it can reduce your access to the federal small business deduction.
Holding real estate through the corporation is generally possible, but the rules vary by province, and there can be tax and regulatory considerations depending on how the property is used. If real estate is part of your plan, confirm the details for your province before you buy.