October 2025 - Should You Incorporate as a Professional in Canada?

A clear vision for incorporating your practice

If you’re an optometrist in Canada, you probably spend your days helping people improve their vision. But, when it comes to your own finances, a question may remain: Would a professional corporation (PC) improve your financial situation?

A simple benchmark for considering incorporation is if you are earning more than you are spending. If the answer is YES, then incorporation may make sense for you.

However, before jumping in with two feet, there are still a few factors to consider.

1. Tax Deferral as a Corporate Advantage

Corporate tax rates are lower than personal tax rates across the country. By leaving extra earnings inside your PC, you can defer personal tax and create an opportunity for the money to compound.

If managed correctly and with consideration for the corporate tax rules, you can optimize your after-tax returns. Leaving excess earnings in your corporation will defer tax until such time that they are withdrawn as salary or dividends in the future. How you invest corporately will help determine how much tax you will pay once withdrawn.

Examples of tax-efficient investing:

•Focus on earning capital gains and Canadian dividends.

•Avoid loading up on interest income (bonds, GICs, etc.) inside the corporation.

•Monitor the passive income grind on the small business deduction.

•Use the Capital Dividend Account strategically for tax-free shareholder payouts.

2. Increase Your Investment Buying Power

The funds that remain in the corporation from your practice (retained earnings) are only subject to active business tax rates in the year they are earned. These funds are then available to be invested corporately.

For example, if an Optometrist Doctor (OD) in British Columbia (BC) is intending to invest earnings of $300,000, they face two options:

* Assumes no other personal income.

This provides a significant increase in investment buying power. Over the long term, this tax deferral represents a massive increase in wealth accumulation.

Going back to our example, if the OD in BC invested the available to invest cashflow from above, every year for 10 years, earning a rate of return of 5%, they would have the following investments:

Investing within the corporation would yield almost $1 million more after 10 years, compared to a personal investment.

3. Control Over How and When You Take Income

The corporation receives the compensation earned by your practice. You decide how and when to get paid personally:

•Salary (generates RRSP room, deducts from corporate income)

•Dividends (no RRSP room, may be possible to split with family and corporate recovery of refundable taxes)

•A mix of both Salary and Dividends (multiple benefits personally and corporately)

Withdrawing funds from the corporation can yield a wide variety of tax results, and by planning ahead, an efficient tax result can be achieved to provide the highest after-tax cash flow available.

There is also the potential ability to declare a corporate year-end that is different from the personal tax year, which ends on December 31. This approach could also introduce further tax deferral opportunities.

For example, with our OD in BC, which is incorporated with a December year-end, if $100,000 is taken as income in December of 2025, the personal taxes are due in April 2026.

By electing a June year-end for the corporation, that same $100,000 of income could be included in 2026 personal income, with taxes due in April 2027, thus deferring the tax balance owing for an additional year.

4. Income Splitting: No Longer 20/20

Generally, only licensed members of the profession can be voting shareholders of a professional corporation. However, in many provinces, family members are also able to be non-voting shareholders, and shareholders can receive dividend income.

Before the tax on split income (TOSI) rules in 2018, you could split dividend income with a spouse and adult children, sharing the tax burden between multiple people. This option is now limited to particular circumstances, such as when family members actively work in the business. However, there are still beneficial reasons for family members to be shareholders of your PC.

Income splitting during retirement may still be quite advantageous. In the year that the OD turns 65, the opportunity to split out dividends with their spouse becomes available again. This creates an opportunity to access funds built up in the corporation and distribute them tax-efficiently.

At last, our OD in BC is ready to retire, the following example shows the benefit of having a spouse as a shareholder in the corporation once the OD has turned 65 years of age:

No Income Splitting Available: $300,000 of income results in $54,444 of tax, which equals $245,556 net proceeds.

Income Splitting with Spouse: $300,000 of income results in $23,200 of tax, which equals $276,800 net proceeds.

Benefit of Income Splitting: $31,244

Once you are consistently earning more than you spend and are focused on saving and investing, it may be worth exploring the long-term benefits of incorporating. While incorporation comes with added costs and complexities, it can offer significant tax efficiencies and deferral opportunities that help accelerate your savings and retirement goals. As demonstrated in our example, selecting the right corporate structure and year-end can result in significant financial benefits for optometrists.

The Financial Planning Team at Network Wealth is happy to help run the numbers to determine whether incorporating makes sense for you. For any ODs who have already incorporated their practice, the Network Wealth team can serve as an additional set of lenses to ensure you are taking full advantage of all the available benefits of your corporate structure. To book a meeting with us, email info@networkwealth.com