DoctorsIncorporation
Illustrative planning scenario — not an actual client. This example is hypothetical, created for educational purposes, and does not represent guaranteed results. Individual circumstances vary; always seek professional tax, legal and insurance advice before acting.
Client Profile
A family physician in her mid-30s, five years into practice as an associate, who has just set up a professional corporation to bill through as she takes on a larger patient panel.
The Situation
Her income had grown steadily, but everything was still being paid personally and taxed at her marginal rate. Setting up a corporation created an opportunity to manage how and when income was drawn — but also introduced questions she hadn’t faced before: salary vs. dividends, what insurance should sit inside the corporation, and how much to leave as retained earnings for future use.
What She Initially Wanted to Solve
Whether to keep contributing to her personal RRSP the same way, now that she had a corporation available to invest through as well.
What Made It More Complicated
Her accountant had set up the corporation for tax purposes but hadn’t addressed how her existing disability insurance, savings habits or investment accounts should change now that a second set of accounts existed. Meanwhile, she still had student debt and a mortgage to manage.
Planning Priorities
- Decide how to split available cash flow between personal debt repayment, RRSP/TFSA contributions and corporate investing
- Review whether existing disability insurance was sized appropriately now that some income would flow through the corporation
- Understand the trade-offs between salary and dividends for a given year
- Build a simple framework to revisit annually rather than deciding everything at once
A Coordinated Planning Approach
- Reviewed personal cash flow alongside the corporation’s, rather than treating them as separate
- Modelled a salary/dividend mix for the current year in coordination with her accountant
- Assessed disability coverage against combined personal and corporate income exposure
- Set a starting policy for retained earnings vs. reinvestment, to be revisited each year
Professional Coordination
- Accountant — salary/dividend mix, corporate tax filings
- Lawyer — updated incorporation and shareholder documents as needed
- Financial planner — coordinated the insurance review and the personal/corporate investment plan
Important Considerations
- Salary and dividend decisions carry tax consequences that depend on a person’s full financial picture and can change with tax law — this is not tax advice
- Insurance coverage and pricing are subject to underwriting
Incorporation changes the questions, not just the numbers — the plan has to be revisited each year, not just built once.
Related Service: Learn more about our Financial Planning for Doctors services.
