Doctor's Financial Insights - Basics of a Medicine Professional Corporation (MPC)

Doctor's Financial Insights is a bi-weekly newsletter prepared in collaboration with Timothy Knight, CFP. The goal of this newsletter campaign is to share practical tax and financial planning insights tailored specifically for physicians - from the benefits of incorporation, to retirement planning, and more advanced strategies.

This week, we’ll start with the basics: 

• Should you incorporate?

• And for those earlier in practice, what does it actually mean to operate through a Medical Professional Corporation (MPC)?

Key Characteristics of a MPC

At a high level, a corporation is a separate legal person from you as an individual. This means the assets and income earned by the corporation do not belong to you personally. However, as a shareholder, you control how and when you access those funds (subject to tax rules).

If you’re considering practicing through an MPC, here are some key legal fundamentals to be aware of:

• Your MPC must be registered with the College of Physicians and Surgeons of Ontario (CPSO).

• Only licensed physicians may own voting shares of the MPC.

• Certain family members or family trusts may own non-voting shares.

• Only physicians may act as directors and officers.

• The MPC may only carry on the practice of medicine and related activities, including investing surplus funds.

• An MPC does not protect you from professional malpractice.

  
  

Financial and Tax Benefits of an MPC

There are several reasons physicians consider incorporating. Below are some of the most common ones.

Benefit #1: Tax Deferral on Earnings

In Ontario, an MPC pays approximately 12.2% corporate tax on active business income up to $500,000 (the small business limit).

• If your MPC earns $500,000, roughly $439,000 remains after corporate tax to reinvest inside the corporation.

• By comparison, earning $500,000 personally as a self-employed physician can result in approximately $230,000 of personal tax and CPP, leaving about $270,000 after tax.

  
  

The key difference is tax deferral — not tax elimination. Incorporation allows you to defer personal tax on income you don’t immediately need for personal spending. Also, because the corporate tax rates are lower than personal tax rates, more after-tax money remains inside the corporation for reinvestment and growth.

Benefit #2: Flexibility in How You Pay Yourself

Realistically, most physicians need to withdraw funds from their MPC to support their lifestyle. Typically, this is done through salary, dividends, or a combination of both. Below are some key differences between salary and dividends.

Paying yourself a salary:

• Reduces MPC’s corporate tax (salary is deductible expense to the MPC).

• Creates RRSP contribution room.

• Requires CPP contributions.

• Often preferred by lenders for mortgages and personal financing.

• Comes with payroll compliance and remittance obligations.

  
  

Paying yourself dividends:

• Does not reduce MPC’s corporate tax (dividend is not deductible to the MPC).

• Generally taxed at a lower personal tax rate than salary.

• No CPP contributions.

• Simpler administration (no payroll).

  
  

With either method, you retain flexibility to decide how much to withdraw and how much to leave inside the MPC for reinvestment.

Benefit #3: Access to Corporate-Level Planning

Operating through an MPC opens the door to planning strategies that are not available (or are less effective) for unincorporated physicians, including:

• Health Spending Accounts (HSA).

• Corporate investing of surplus funds.

• Lifetime Capital Gains Exemption (LCGE) planning.

• Corporate life insurance strategies.

• Individual Pension Plans (IPP).

  
  

These strategies require careful coordination and are not “one-size-fits-all,” but they can be powerful when used appropriately.

When Incorporation May Not Make Sense (Yet)

Incorporation isn’t automatically the right move. It may not make sense if:

• You expect to spend most or all of your earnings personally, leaving little surplus to retain inside the MPC.

• You’re early in practice and want to keep things simple.

• You plan to remain a fully salaried physician.

• The additional administrative costs outweigh the short-term benefits.

  
  

Final Thoughts

An MPC is not a tax or financial magic wand. When used thoughtfully, it can be a powerful tool — but it comes with added cost, complexity, and the need for financial discipline.

The better question isn’t: “Should I incorporate?”

It’s: “What problem am I trying to solve by incorporating?”

• Cash flow management?

• Tax deferral?

• Long-term investing?

• Lifestyle flexibility?

  
  

The answers should guide the structure — not the other way around.

Have any questions? Please contact Francis Do at Francis@francisdo.com or 416-572-9633.