Dental practice incorporation: professional corporations, associates and equipment

Incorporating a dental practice is two decisions wearing one name. There is a regulatory decision, governed entirely by your provincial dental college, about whether and how a professional corporation may be formed and who may own it. And there is a tax and structuring decision, governed by the Income Tax Act, about whether the corporation actually improves your position. They are frequently conflated, and the regulatory side is the one most likely to be assumed rather than checked.

The regulatory layer comes first

A professional corporation is a creature of provincial legislation and professional regulation. Each province regulates dentistry through its own college, and that college — not the tax authority — decides the terms on which a practice may be incorporated. The matters typically controlled at that level include:

• whether a permit, certificate of authorization or similar approval is required before the corporation may practise, and how often it must be renewed;
• who may hold shares, and whether non-licensed family members may hold any class of share at all;
• what the corporation may be named, and how the name must appear;
• what activities the corporation may carry on; and
• what has to be reported to the regulator when ownership or directorship changes.

These rules are genuinely different from province to province, and they have changed over time — particularly the question of family share ownership, which has been narrowed in some jurisdictions and not others. That makes second-hand advice unusually dangerous here. A structure that a colleague set up in another province, or in the same province some years ago, may simply not be permitted for you today. Start with your own regulator’s current requirements and build the tax plan inside them, not the other way round.

What incorporating does and does not do

What it can do: create a separate legal entity that earns the practice income, allowing profit not needed personally to be retained and taxed in the corporation at corporate rates rather than immediately at personal rates. It also creates a structure for deliberate compensation planning — how much salary, how much dividend — and a vehicle that can eventually be sold or transitioned.

What it does not do is remove your personal professional liability for your own clinical work. Regulators are consistent on that point, and it is the single most common misunderstanding about professional corporations. Incorporation separates the business and commercial side of the practice; professional liability insurance is what responds to clinical risk.

Nor is incorporation automatically worthwhile. It only pays where profit genuinely stays in the corporation. A practitioner who draws essentially everything out each year is adding a corporate return, statements and compliance without a deferral to show for it. The threshold question is not “can I incorporate” but “how much will predictably stay in.” The general trade-offs are set out in the guide for incorporated professionals.

Associates: employee or independent contractor

Almost every practice that grows past one operator faces this, and it is where the real assessment risk in a dental file sits. An associate agreement calling someone an independent contractor does not make them one. The CRA looks at the substance of the working relationship, and the recognised factors are:

• Control — who decides hours, scheduling, treatment protocols and how the work is carried out;
• Tools and equipment — who provides the operatory, the chair, the instruments, the sterilisation and the software;
• Chance of profit and risk of loss — whether the associate can genuinely profit or lose from how they run their own work;
• Integration — how embedded the associate is in the practice’s own business.

Read honestly, a typical associate arrangement in a clinic owned by someone else — fixed days, practice-owned equipment, practice-set fees, practice-held patient records, percentage remuneration — leans toward employment on several of those factors at once. That does not settle it; the whole relationship is weighed. But it does mean the classification deserves a considered position rather than an assumption.

Where it is genuinely unclear, the CRA will rule on whether the employment is pensionable, insurable or both. Getting that answer prospectively is far cheaper than getting it through an assessment. If it goes the wrong way after the fact, the practice can be assessed for unremitted CPP and EI on both sides, with penalties and interest, across every open year and every affected associate. The broader framework is covered in the guide to CRA worker classification.

There is a second-order issue for associates who incorporate their own professional corporation and work almost exclusively for one clinic: the personal services business rules, which strip out the small business deduction and most deductions if they apply. That risk rises as the arrangement looks more like employment.

Equipment and how it is written off

A dental practice is capital-intensive, and equipment is not deducted in the year it is bought — it is depreciated through capital cost allowance at the rate for its class. The classes that matter most:

The $500 line is the one worth knowing, because it decides between an immediate full write-off and a 20% declining-balance claim on the same invoice. Instruments below it fall into Class 12; tools at or above it go to Class 8. Practices that buy instruments in bulk often have both classes represented on a single purchase order, and a bookkeeper without the rule will code the whole thing to one class.

Two things sit outside this table. Leasehold improvements — the build-out of a clinic you lease rather than own — are treated under their own rules rather than as ordinary equipment. And practice goodwill, where a practice is purchased, is not equipment at all. Both are worth settling before a purchase or a fit-out closes. The general mechanics are in the guide to equipment CCA classes.

Paying yourself out of the corporation

Once the corporation exists, the practice income is the corporation’s, and getting it into your hands becomes a deliberate decision rather than an automatic one. The two routes are salary and dividends, and they behave differently in ways that matter to a dentist specifically.

Salary is deductible to the corporation, creates RRSP contribution room, and brings the practice into the payroll system with CPP contributions on both sides. Dividends are paid from after-tax corporate profit, create no RRSP room, and attract no CPP. Neither is universally better; the right mix depends on how much you need personally, how much is genuinely staying in the corporation, and what you want your retirement saving to look like. What is consistently a mistake is drawing money without deciding which it was — that produces a shareholder loan balance, which has its own timing rules and can end up in income if it is left outstanding.

A second question that arises immediately for professional corporations is whether family members may hold shares at all, and if so what kind. That is a regulatory question before it is a tax one, and it is precisely the point at which advice from another province stops being transferable.

Records

Business records and supporting documents generally have to be kept for six years from the end of the last tax year they relate to. For an incorporated practice the tax year is the fiscal period, not the calendar year, which is easy to get wrong when a year-end is not 31 December. Equipment invoices in particular are worth keeping beyond the general period, because the CCA history of an asset can matter long after the year it was bought.

Getting it right

The sequence that works is: confirm what your regulator permits, then design the corporate structure inside those limits, then settle the associate classification honestly, then build the CCA schedule properly from the first equipment purchase. Doing it in that order avoids the two expensive outcomes — a share structure the college will not accept, and an associate classification that unwinds several years later. A dental accountant who has done it before is mostly useful for keeping that sequence straight.

This article is general information for Canadian dentists and is current as of July 2026. Professional corporations are regulated provincially by each profession’s own regulatory college, and the rules on permitted shareholders, naming and permits differ by province — confirm the requirements with your own regulator before acting. It is not tax advice; please speak with a CPA before acting on anything here.