Introduction

Most physicians in Ontario have heard that they should incorporate. Fewer have a clear picture of how a medical professional corporation actually works — what it can and cannot do, who can own shares, and how the tax advantages function in practice.

This article provides that foundation. It is written for physicians who are incorporated or considering incorporation and want to understand the structure they are operating within.

What Is a Medical Professional Corporation?

A medical professional corporation (MPC) is a corporation through which a physician provides medical services. In Ontario, MPCs are governed by the Medicine Act and the Regulated Health Professions Act. The College of Physicians and Surgeons of Ontario (CPSO) sets the rules around who can hold shares and what activities the corporation may carry on.

An MPC is not simply a regular corporation that happens to be owned by a doctor. It operates under professional corporation rules that restrict share ownership and require that the corporation be used to provide professional services, not passive investment activities.

Who Can Hold Shares in a Medical Professional Corporation?

Under Ontario's professional corporation rules, voting shares of an MPC must be held by the physician (or physicians) who are authorised to practise medicine. Non-voting shares may be held by certain family members — specifically, the physician's spouse and children who are of the age of majority — as well as a holding company controlled by the physician.

This share structure is relevant to income splitting. Non-voting shares held by family members can receive dividends, which under certain circumstances allows income to be shifted to family members in lower tax brackets. However, the tax on split income (TOSI) rules, introduced and expanded between 2018 and 2019, significantly restrict income splitting in most family corporation situations. The rules are complex and highly fact-specific. Whether dividends paid to a family member from an MPC are subject to TOSI depends on the family member's involvement in the business, their age, and other factors. This is an area requiring careful analysis — not assumptions based on the pre-2018 landscape.

How the Tax Advantage Works

The primary tax advantage of an MPC is deferral. When a physician earns income personally, it is taxed at their marginal personal rate — which, at high income levels in Ontario, can exceed 53%. When income is earned through the MPC, the corporation pays tax at the small business rate (approximately 12.2% combined federal-provincial in Ontario on the first $500,000 of active business income in 2026). The remaining after-tax income can be retained in the corporation.

The physician pays personal tax only when they extract funds from the corporation — as salary, dividends, or a combination. In the meantime, the after-tax corporate funds can be invested and compound inside the corporation. The difference between 12.2% and 53% is the deferral that makes incorporation valuable at high income levels.

To be clear: the income is not exempt from personal tax. It will be taxed when distributed. The advantage is that funds grow inside the corporation at a lower initial tax cost, creating a larger pool to invest before personal distribution.

The Billing Entity Question

In Ontario, most physicians bill OHIP for insured services. The question of whether OHIP payments can be directed to an MPC rather than to the physician personally is a longstanding point of clarity: yes, OHIP payments can be assigned to an MPC, provided the assignment is properly documented and the CPSO requirements are met.

For physicians working in hospital settings or academic practices, the billing structure may be more complex, and the relationship between the physician, the hospital, and the MPC needs to be properly documented.

Operating Expenses Through the MPC

Eligible business expenses incurred in the course of earning professional income can be deducted through the MPC. Common examples for physicians include medical equipment and supplies, continuing medical education costs, professional association fees, medical malpractice insurance (CMPA premiums), office expenses, and a portion of vehicle expenses where a vehicle is used for professional purposes.

Personal expenses paid through the MPC are not deductible and may constitute shareholder benefits — a point discussed in more detail in Rotaru CPA's shareholder benefit article.

What an MPC Cannot Do

An MPC is not permitted to carry on a business other than the practice of medicine (with limited exceptions for incidental activities). It cannot be used as a general investment vehicle — excess funds retained in the MPC should be managed with this restriction in mind. A holding company structure, separate from the MPC, is often used to hold passive investments — a point discussed in Rotaru CPA's holding company article.

When to Speak With a CPA

Setting up an MPC is only the beginning. Compensation strategy, passive income monitoring, TOSI analysis for family dividends, and annual corporate compliance are ongoing. A CPA familiar with medical professional corporations — not just general corporate tax — is important for physicians who want to use the structure effectively.

Rotaru CPA works with physicians and medical professionals across Ontario to structure and manage their professional corporations. Book a consultation to discuss your MPC.