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Unfortunately, moving your medical practice requires as much hoop-jumping as setting it up. When relocating, you have several options to choose from, each with different processes and considerations.
Let’s dive right in:
Option 1: Maintain both corporations
Run two practices
After moving and incorporating a new medical professional corporation, you can retain your existing corporation in some provinces. Both businesses must meet their own provincial requirements to operate. You’ll have to maintain an active license to practice medicine in that province and have an office address registered with your college or professional body. The business’s license or certificate of authorization will also have to be renewed annually.
Decertify the original business
Decertification turns your medical professional corporation into a non-professional business corporation. After decertification, it can be used for other business or investment initiatives, though some provinces don’t allow holding companies to become shareholders in medical practices. In this case, your decertified company would be prevented from owning shares in your new practice. It’s best to check with your Zeifmans advisor to see if provincial regulations could affect your business.
To decertify, you can apply to your college for decertification or simply let your license or certificate of authorization expire. Don’t forget to remove any professional designation in your business name. Your decertified corporation’s articles and bylaws may also need to be amended.
Option 2: Transfer the corporation to a new province
Instead of closing your medical practice and incorporating again in your new province, it may make more sense to move the corporation into the new jurisdiction by getting a continuance.
Though steps differ by province and medical profession, in general, you’ll need to apply for a new provincial medical practice license and submit draft articles of continuance to the college for pre-approval. You will also have to file for a new certificate of authorization or license for your medical professional corporation.
On the business side, you’ll want to consult your legal advisor to ensure your corporation is set up correctly to qualify for licensing as a medical professional corporation in your new province. Shareholders may have to approve a special resolution authorizing the continuance.
Lastly, you’ll have to:
- File an application for “authorization to continue” with the corporate registry of your new province.
- File the articles of continuance with your current province.
- Request consent from the provincial ministry of finance (or CRA, as applicable) to move the business.
Option 3: Incorporate a new business
Because getting a continuance can be a time-consuming process, your financial advisor may recommend that the most efficient and budget-friendly option is to shut down the existing business and incorporate it anew.
In this case, it’s a good idea to revisit your corporate structure to ensure it still works well for your business. The most important things to discuss with your advisor are:
- Shareholding options – who are your shareholders, what types of shares you’re issuing, and if shareholders will have voting rights.
- Corporate structure – certain restrictions on structuring can impact succession planning.
- Investment strategy – medical professionals are limited to generally-accepted business activities, but investing in publicly traded stocks, bonds, mutual funds and real estate for the practice are usually deemed acceptable.
Option 4: Buy or sell
The last option is you could choose to sell your existing medical practice and use the profits to purchase another operational practice to hit the ground running. The biggest benefit of purchasing an existing clinic is that everything is already established for you, including the business model, a client base, and your staff. When buying a clinic, you’ll likely start making a profit from day one without the hassle of slowly attracting new patients.
On the downside, buying an established clinic means you’ll have less control over how your business is run. Customers will expect a certain level of service, meaning it’s harder to make significant changes to operations, fees, and services.
Other considerations
Your legal obligations to your patients
College policies often require doctors to give patients advance notice of a planned closure. You must notify your patients through one or more direct channels, such as a letter, email, phone or in-person at a scheduled appointment.
- Continuity of patient care, which may involve providing prescription renewals, so patients have time to find another provider, ensuring appropriate follow-up for pending test results and taking reasonable steps to arrange for ongoing care.
- Enable patient access to their medical records, including transferring to the new provider. It’s best to check with your advisor in case your College requires a signed Record Transfer and Access Agreement between yourself and the new physician. This transfers legal custodianship of the records to the overtaking doctor and provides you with access to the records in the event of a medical-legal matter. Original records for deceased patients, former patients, and even digitized paper records must be stored for 10 years from the date of last entry, or in the case of minors, 10 years from the time they would have reached the age of majority.
Leases and supplier contracts
Whether you’re signing a new lease or taking one over as part of an existing practice, beware of hidden risks in leasing documents. Your advisor can help catch these major ones:
- Assignment requirements – will any requirements impact your ability to sell or transfer the business in the future?
- Personal finance obligations – who’s guaranteeing the lease and would you be on the hook for paying rent if a future tenant fails to pay?
- Protection and security – if there’s an unexpected event and you can’t work, is there a death and disability clause in place to protect you?
- Practice relocation – Can your landlord relocate you and if so, who pays associated moving expenses?
There are plenty of additional contacts and leases for both parties to consider as well, such as phone and internet, waste disposal, cleaning, maintenance and security. And what about assets? You can work worth your advisor to set up a purchase and sales agreement for your computer equipment, furniture and other major assets.
Tax implications
Whether you’re incorporating, buying, selling, getting a continuance or decertifying, there are going to be changes to your taxation. Sitting down with your advisor to update your tax planning strategy is another important step.
Small Business Deduction
Professional corporations pay substantially less tax than partnerships or individual proprietors under the small business deduction. In 2016, the government did restrict some professional corporations’ ability to claim this deduction, depending on their corporate structure, so be sure to consult with your advisor to take advantage of this tool.
Fund retirement or parental leave
If you have additional revenue in the corporation (also known as corporate retained earnings), you can choose to leave the money there to fund your retirement, sabbatical or parental leave. It will be taxed at the lower corporate rate and when you are finally ready to withdraw it, your personal tax rate will likely be lower as well, saving you even more.
Income splitting
A common way for families to reduce the high earner’s taxes is to income split. You can split your income with your spouse by making them a corporate shareholder and paying them corporate dividends. If they have a lower income than you, they will be taxed at their lower personal rate. You can also pay your spouse a salary from the business, but it must be “reasonable” or equivalent to what you would pay a third party for the same work.
Your children can be made shareholders, but you can only income split with them when they hit 18. Dividends would be paid directly to them and taxed at their lower marginal rate.
GST/HST obligation
As a general rule, medical practitioners don’t need to collect or remit GST/HST because the majority of their services are tax-exempt or they fall below the annual threshold ($30,000 in a rolling four-quarter period). However, changing legislation defunded many “add-on” services, which are now taxable.
Larger clinics may unknowingly have a reporting requirement because they provide a high enough volume of taxable services. The CRA has also stepped-up enforcement actions, reassessing medical practitioners for no-longer exempt services like being paid to lecture, perform research, consult on litigation or act as an expert witness. To avoid complications with an audit or failure-to-file penalties, be sure to review your finances with your tax advisor.
A trusted team is key
Not only does it take a team to run a medical practice, but it also takes a team to move one. Let Zeifmans help you pick the right relocation strategy and ensure your wealth management, tax planning, succession planning, and leasing needs are taken care of. We’ve helped countless medical professionals successfully grow their practices through sales, purchases and moves over the last 60 years. Contact us today!
