What is a Corporation?
Simply put, a corporation is a legal entity. As a doctor, you should consider incorporating because you could:
- reduce income taxes
- defer income taxes
- split income with family members (in limited situations)
Under certain circumstances, a corporation can provide you with protection from your corporation’s debts and liabilities.
Who Owns a Corporation?
A corporation is owned by shareholders and managed by directors. The corporation must be owned by at least one person. Similarly, there must be at least one director. (The director and owner can be the same person.)
Generally, the doctor must own the majority of all shares and a majority of the voting shares of the company.
What kinds of shareholders are there?
A company has two main classes of shareholders:
- Common shareholders: generally, the main principal or a family trust that the principal controls owns the common shares. As well, increases or decreases in the value of the company directly affect the value of the common shares.
- Preferred shareholders: generally, these shares are used to facilitate income splitting with family members. The value of these shares is fixed, so they don’t change over time.
Who can own shares of a professional corporation?
* The definition of a spouse and common-law partner depends on the jurisdiction. It generally includes a person married to the professional or with whom the professional is living in a conjugal relationship outside marriage for a certain time period.
** In Nova Scotia, for a professional corporation carrying out the practice of medicine, any person may beneficially or legally own its shares.