The Professionals Practice Group at Siskinds has extensive experience dealing with many different legal issues that dentists may face throughout their careers. We understand that each stage of a dentist’s career will attract different legal needs and considerations. The needs of a newer dentist may be different than those of a dentist who is nearing retirement from his or her practice. As busy professionals, dentists may experience rapid change as their careers and personal circumstances advance. Our experience in advising dentists on a variety of legal issues allows us to offer a comprehensive, multi-disciplinary suite of services tailored to assist dentists throughout their personal lives, their career, and into retirement.
The specific legal services that we provide, which are tailored to dentists, include:
- incorporating, organizing, and maintaining a professional corporation
- regulatory compliance with the Royal College of Dental Surgeons of Ontario (RCDSO)
- corporate reorganization and restructuring
- purchase and sale of dental practices
- partnership, cost-sharing, and shareholder agreements
- commercial and residential real estate and leasing
- employment matters
- high net worth estate and succession planning
- wills and powers of attorney
- cyber security and privacy
A significant number of dentists choose to operate their practice through a professional corporation under the Ontario Business Corporations Act and the Regulated Health Professions Act. Once incorporated, a Certificate of Authorization from the RCDSO is required for the professional corporation to practice dentistry in Ontario. We routinely advise dentists on matters involving the incorporation, creation and maintenance of a professional corporation, to ensure regulatory compliance with the RCDSO, laws and regulations. The professional’s relationship with his or her professional corporation will be as an employee. We assist in preparing an employment agreement that will provide flexibility on choosing compensation arrangements. However, the dentist still has personal professional responsibility to his or her patients.
Incorporating a dental professional corporation can bring significant advantages, including being taxed at a lower corporate tax rate compared to a personal tax rate, the payment of dividends to shareholders, and tax deferral strategies. We routinely provide advice to dentists about who may own shares of a dental professional corporation and what types of shares may be issued to shareholders. We work directly with tax advisors and accountants to ensure that the most appropriate corporate structure is established in order to achieve long term goals.
Renewal Process for Dental Professional Corporations
The RCDSO requires that the Certificate of Authorization held by each dental professional corporation be renewed annually. The process to renew the Certificate of Authorization must be completed by August 31st of each year and requires the dentist to complete the online annual renewal application on the RCDSO website and provide the required documentation requested by the RCDSO including a Corporation Profile Report. The application contains questions that the dentist must answer with respect to their corporation in order for the RCDSO to determine whether the corporation continues to be eligible for a Certificate of Authorization. If the RCDSO determines that the corporation is no longer eligible for a Certificate of Authorization based on the information provided in the dentist’s renewal application, the RCDSO will not renew the Certificate of Authorization.
Purchase and/or Sale of a Dental Practice
For many dentists, their dental practice is one of the most valuable assets they own and selling or purchasing a dental practice is one of the biggest decisions of a dentist’s career. The proceeds of sale of the dental practice will form a significant portion of the selling dentist’s estate and will likely impact their retirement plan. If a dentist determines that he or she wants to sell their practice, it is important to develop and execute a plan, well in advance of the sale, to prepare the business in order to obtain the best price for the practice. Advance planning for the sale of a dental practice ensures that the dentist has enough time to fully consider and evaluate the financial and tax implications of selling a practice and allows the dentist to develop a strategy to ensure a smooth and successful transition.
There are many considerations that should be made with respect to the sale or purchase of a dental practice including any financing requirements of the buyer and how these requirements may impact the timing of the sale. It is not uncommon for one of the conditions of the sale to require the selling dentist to continue practicing as an associate of the practice for a period of time following the closing of the sale in order to help preserve the goodwill of the practice. This may have an impact on the timing of the sale, the transition plan of the selling dentist as well as their potential timing of retirement.
The sale of a dental practice can be achieved in one of two ways: either through the sale of shares held in the professional corporation or the sale of assets. The option to sell shares of a dental practice provides a potential opportunity for the selling dentist to claim a lifetime capital gains exemption on the gain from the sale, provided that certain conditions are met. Early planning for a sale will allow the seller to make sure that the shares of the corporation will qualify for the capital gains exemption, and to engage a specialized legal and accounting team to help them with preparations for the sale. Determining whether to structure the sale as an asset sale or a share sale is usually dependent on the tax implications associated with each option. We routinely assist dentists who are planning to purchase a practice or sell their practice and we work directly with their accountants and tax advisors to identify the most appropriate strategies in order to minimize the tax consequences associated with the sale or purchase, taking into account the needs and goals of our clients.
Retirement and Succession Planning
As dentists approach retirement, there are many considerations to be made regarding the development of an effective succession plan for their dental practice. Planning for retirement and getting a head start on the development of a succession plan is beneficial to ensure that a sufficient amount of time is devoted to the consideration of several very important issues. When planning to transition into retirement, it will be necessary to determine an appropriate strategy to include the projected proceeds from the sale of the practice as part of the retirement plan. Whether the proceeds are received by the dentist personally from the sale of shares or as an asset sale (either by the dentist or his or her professional corporation, depending on their circumstances) with the proceeds likely to be received by the professional corporation, will drive the approach to planning. If a professional corporation sells the assets of the practice, after completing the sale it will need to be re-characterized as an investment holding company. It will be necessary to notify the RCDSO and to file articles of amendment to remove the specific elements that are unique to a professional corporation. In many dental practices, they may have a structure that includes two or more dentistry professional corporations. The specific structure will affect the planning required for a sale and retirement planning. We routinely assist dentists with the development and execution of their succession plan and help identify the most beneficial options available to them in order to ensure a smooth transition into retirement.
Dentists will often seek advice on estate planning. As dentists progress in their careers, the planning process becomes more complex and we routinely work with our clients’ tax and financial advisors to address the development of a clear plan. A key component of the estate plan will be the preparation of wills and powers of attorney. Since the majority of dentists practice dentistry through a professional corporation, it may be advisable to have dual wills, which is an effective estate planning strategy used to protect certain eligible assets from estate administration tax, or probate. Shares in a private corporation do not commonly attract a requirement for probate. Engaging dual will strategy allows for the creation of a secondary will with respect to the shares and shareholder loans of the professional corporation to ensure that the professional corporation, as well as other eligible assets, are protected from estate administration tax, which would not be the case if only one will was used. The benefit of dual will strategy is quite desirable for dentists who practice through a professional corporation, especially as over time a significant portion of the dentist’s net worth may be held by the professional corporation.
If you would like to discuss your estate plan with us, please contact us and we will be happy to schedule an initial planning meeting.