Guide
Tax and planning for BC dentists, from associate to owner.
A dental career usually moves through three stages: associate, practice owner and, eventually, seller. Each stage has its own tax decisions.
As an associate
Most associates are self-employed and paid a percentage of collections. No tax is withheld, so you'll need to set money aside and make instalments once you owe more than $3,000 at filing. Lab fees, dues, insurance and continuing education are generally deductible.
Incorporating your practice
BC dentists can practise through a dental corporation with a permit from the BC College of Oral Health Professionals. As with physicians, the benefit comes from leaving income you don't need in the corporation, where it's taxed at the small business rate.
Buying a practice: assets or shares
- Buying assets lets you depreciate equipment and goodwill, which reduces tax in the years after purchase. Buyers usually prefer it.
- Buying shares means you take over the corporation, including its history. Sellers usually prefer it because it can qualify for the lifetime capital gains exemption.
- Price and structure are negotiated together, so we model both before you sign.
Lenders typically ask for compilation financial statements and projections. Interest on money borrowed to buy a practice is generally deductible, and how the purchase price is allocated affects your deductions for years.
Running the practice
- Payroll for hygienists, assistants and front-desk staff
- Equipment financing and depreciation
- Most dental services are GST exempt, so GST paid on costs usually can't be recovered
- Monthly reporting so you can see production, collections and overhead
Planning a sale
If you may sell in the future, keep the corporation eligible for the lifetime capital gains exemption. At the time of sale, substantially all of its assets must be used in the active practice, and excess cash or investments can disqualify it. A holding company can help keep the operating corporation clean.
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