In short: A holding company does not get a physician around the passive income clawback; what it offers is creditor protection and a cleaner separation between practice and investments, at a cost of roughly $1,500 to $3,000 a year in accounting and filings. Whether a holdco may own Medical Professional Corporation shares at all depends on the province's ownership rules. ZAI Wealth Management explains when the structure pays for itself and when it does not.
Why physicians consider a holdco
- Creditor protection: your MPC is the operating business. It signs leases, employs staff and could face claims beyond your insurance. Investments kept in a separate company are further from those risks.
- Cleaner separation: keeping investments apart from practice operations makes planning, and an eventual wind-down, simpler.
A holding company does not get around the passive income clawback. Passive income of associated corporations is added together.
Check your province's ownership rules first
Moving money from an MPC to a holdco tax-free usually needs the holdco to own shares of the MPC, with inter-corporate dividends. Whether a holding company can own MPC shares depends on your provincial college: some provinces allow it and others restrict shareholders to the physician (and sometimes family members). Where it isn't allowed, other structures may be needed.
Inter-corporate dividends are generally tax-free, but anti-avoidance rules can apply to larger transfers, so plan them with your accountant.
The cost-benefit line
A holdco adds roughly $1,500 to $3,000 a year in accounting and filing costs. As a rule of thumb, it rarely pays off while your corporate investments are small or you're saving little each year. Once your corporate portfolio and yearly savings are substantial, the protection and flexibility can outweigh the cost.
Run your own numbers with our Physician Tax Savings Calculator.
For illustration and general information only. Tax rules change and every situation is different, so speak with your advisor and accountant before acting on anything here.
Common questions
Does a physician need a holding company as well as a medical corporation?
Usually not. A holding company does not avoid the passive income clawback; what it provides is creditor protection and a cleaner separation between the practice and the investments, at a cost of roughly $1,500 to $3,000 a year. Some provinces do not allow a holdco to own Medical Professional Corporation shares at all. ZAI Wealth Management recommends a holdco only once corporate investments and yearly savings are large enough to justify the cost.