Introduction

The transition from dental associate to practice owner involves absorbing an enormous amount of new information simultaneously — clinical operations, staff management, patient communication, equipment, vendor relationships. In that environment, tax and financial planning typically receive whatever attention is left over. That is when the most costly errors occur.

These five mistakes are not exotic edge cases. They are the errors Rotaru CPA sees most commonly from dentists in their first one to three years of practice ownership.

Mistake 1: Not Registering for HST Before the First Taxable Supply

A dental practice generates both exempt supplies (most clinical services) and taxable supplies (cosmetic procedures, oral care products, some treatment planning fees). If the taxable supplies will exceed $30,000 in the first calendar year, the practice must register for HST before — or at the latest, concurrent with — making those taxable supplies.

Many new owners delay registration, assuming they will register "when ready." The CRA does not accept the not-ready explanation. Unregistered practices that exceed the threshold have been collecting money without charging HST on taxable services — which the CRA may require them to remit retroactively, out of the amounts already received.

Fix: Register for HST before opening, regardless of whether you expect to exceed the threshold in year one. Registration costs nothing and eliminates the uncertainty.

Mistake 2: Treating the Professional Corporation's Bank Account as a Personal Account

New practice owners — particularly those who have been dental associates and are accustomed to receiving personal income — often treat the corporate account as a personal account. Dental supplies, staff payroll, and lab fees sit alongside personal groceries, gym memberships, and household expenses. The year-end reconciliation is a mess; the CRA risk is significant.

Co-mingled accounts generate shareholder benefit exposure on every personal amount that flows through the corporation. More practically, the bookkeeping time required to sort out a year of commingled transactions is expensive and entirely avoidable.

Fix: Separate personal and corporate bank accounts from day one, and set up a payroll structure that moves personal funds to a personal account on a defined schedule. Never pay personal expenses directly from the corporate account.

Mistake 3: Ignoring the Passive Income Impact of the Purchase Price Financing

Many dentists who acquire a practice finance a significant portion of the purchase price with a bank loan. The loan sits inside or alongside the professional corporation and generates interest expense — which is deductible. What is less commonly considered is that the acquisition may also have introduced goodwill and equipment at values that affect the CCA deductions available in year one and subsequent years.

New practice owners who acquired assets (an asset purchase) should review the allocation of the purchase price across asset classes with their CPA — the allocation between equipment (Class 8 or 10), goodwill (Class 14.1), and other assets determines how quickly the purchase price is recovered through CCA.

Fix: Before finalising the purchase price allocation in an asset purchase agreement, review the CCA class implications with a CPA. The allocation has a multi-year tax impact.

Mistake 4: Not Setting Up Payroll Correctly Before the First Staff Paycheque

Many new practice owners delay setting up the payroll remittance account — because there is so much else to do and payroll seems like something that can be sorted out "later." The first staff paycheques go out, source deductions are withheld, and then they sit in the corporate account rather than being remitted because the remittance account is not yet open.

Late source deduction remittances attract penalties from the first day they are late. The deemed trust on those amounts means the CRA's priority claim is immediate. There is no grace period.

Fix: Open the payroll remittance account (RP account) with the CRA before the first paycheque is issued. The CRA's Business Registration Online (BRO) process is fast. Your CPA can also handle this registration.

Mistake 5: Not Planning the Year-End Compensation Decision

The first full fiscal year of ownership ends, the corporation has significant net income, and the dentist calls their accountant for the first time to file the T2. The accountant asks: how much salary did you pay yourself this year? The dentist names a number that was set in January with no planning context. The T2 is filed as-is.

The missed opportunity: the compensation decision should have been made in November or December of that year, with a full-year income estimate in hand, informed by the salary/dividend analysis, the RRSP room consideration, and the passive income accumulation projection. Post-year-end, those decisions are locked. The planning window for the year that just closed has passed.

Fix: Schedule a year-end planning meeting with your CPA in October or November, before the fiscal year closes. Use the first nine months of actual results to project full-year income and make the compensation decision with complete information.

When to Speak With a CPA

For dentists in their first year of practice ownership, a CPA should be engaged before the practice opens — not in March of the following year when the first T2 is due. The decisions made in year one establish the structure for all subsequent years.

Rotaru CPA works with new dental practice owners from the acquisition stage through ongoing corporate compliance. Book a consultation to start on the right foot.