Incorporation For Psychologists

As a Psychologist, it’s important to keep your business healthy and profitable. When it’s time to take your practice to the next level, incorporating can help you gain access to a wealth of benefits to ensure you hit all your career goals.

The Benefits of Incorporation For Psychologists

With high earning potential, Psychologists typically find themselves in a high marginal tax bracket, often paying between 30-40% in taxes. Incorporating your practice can help you to defer and reduce personal income taxes, allowing you to keep more money in your pocket.

This makes it easier to reach your long-term financial goals like paying off medical school debt, purchasing a home, or retiring early.

Not only is the corporate tax rate lower than the personal income tax rate, many Canadian private corporations can claim the small business deduction, which would leave their federal tax rate at just 9%. In addition to a lower tax rate, there are other tax strategies that can reduce your lifetime tax payable by hundreds of thousands of dollars. Some examples include the lifetime capital gains exemption, the use of a holding company, and estate freezes.

Incorporating your practice may also provide other benefits, including the use of corporate owned life insurance, a stronger business succession plan, limited liability, professional credibility, and better access to financing and credit options.

Is Incorporation Right for You?

With the many benefits of incorporation, it’s important to know the fees and administrative work that is required. Self-managing your corporation can be complicated; you will have more administrative work to handle, and will also need to to file an income tax return on top of your personal tax return.

Parr Business Law can manage your yearly corporate filings, liaise with the College of Health and Care Professionals of British Columbia, and remove the administrative headache that setting up and maintaining a corporation brings

Considerations Following Incorporation Approval

Bank Account

One of the first steps often involves setting up a corporate bank account. If this applies to you, you will also want to allocate shares and make sure to organize these critical documents for your corporation’s records. Your lawyer can assist you with all of these steps. Additionally, you’ll receive a CRA Business Number upon incorporating your company to open up a MyCRA Business Account.

Tax Planning

It is important to begin tax planning as early as possible. For example, you may want to start income splitting right away, to reduce your family’s overall tax bill from year 1. This requires careful planning to ensure you are compliant with the Tax on Split Income rules in Canada. Another example is the lifetime capital gains exemption, which requires your business to meet specific criteria 2 years prior to the sale of your business. If you want to maximize the exemption amount, you’ll need to start planning years earlier.

Renewal

Psychologists must complete their renewal of registration with the The College of Health and Care Professionals of British Columbia by December 31 of each year. You will need to confirm the completion of your continuing competency requirements, confirm the appointment of your professional executor, and provide details about your professional liability insurance coverage.

FAQs

  • Without incorporation, Psychologists can expect to have a much higher tax liability throughout their lifetime. They may also be subject to additional personal liability in certain instances where they could have instead limited their exposure through a corporation. 

  • Your company name 

    This needs to be a unique name that hasn’t been claimed by another business. If your name contains a restricted title, you must receive consent from the College of Health and Care Professionals of BC to use that name.


    Articles of incorporation

    These outline the rules and structure that your company has. Examples of items that need to be included in this document are business name, number of directors, the rights and restrictions attached to different share classes, and any specific requirements set by the College.


    Incorporation agreement

    This will set out the most basic elements of the corporation, including the adoption of the articles, and the authorized share capital. 


    Director and Shareholder Information

    You’ll need to have the names and mailing addresses of those who will act as the corporate shareholders and directors.


    Registered office address

    This will be the designated address where official notices and documents from the corporate registry are delivered for your business.

Need Advice on Incorporating as a Psychologist?

SCHEDULE A FREE 15-MINUTES CONSULT CALL

When it’s time to incorporate as a Canadian Psychologist, Parr Business Law can help you navigate the incorporation process with confidence and clarity. Our lawyers have the specialized knowledge to provide you with reliable and candid legal advice so you can protect your personal assets and save on taxes. Schedule a free consultation call with us today to learn more.