In short: Physicians who practise through one shared corporation, a partnership or associated corporations are forced to share a single $500,000 small business limit; three physicians billing $450,000 each through one corporation would have $1.35 million competing for one limit. ZAI Wealth Management explains the alternative used by most group clinics: each physician keeps their own Medical Professional Corporation and shares rent, staff and software through a formal cost-sharing agreement, preserving every physician's full limit.
The shared-limit problem
Each unrelated physician's MPC normally gets its own $500,000 small business limit. That can change when the group is structured the wrong way:
- One corporation for everyone: if several physicians practise through a single corporation, that corporation has one $500,000 limit to share.
- Partnerships: income earned through a partnership of corporations is subject to rules that can restrict each partner's small business deduction.
- Associated corporations: overlapping ownership or control can make corporations "associated", forcing them to share one limit.
With three physicians each earning $450,000 through one corporation, $1.35 million of income would share a single $500,000 limit, leaving most of it at the general rate.
The cost-sharing approach
- Keep your own MPC: your billings flow to your own corporation, with its own small business limit.
- Share costs, not income: the group pays rent, staff and software through a cost-sharing arrangement, and each MPC contributes its agreed share.
- Stay independent: each physician's investments, pay and passive income stay separate from the others'.
Have a lawyer draft the cost-sharing agreement, and review it with your accountant.
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
Do physicians in a group clinic share one small business deduction?
Only if the clinic is structured badly. Physicians who bill through one shared corporation, a partnership or associated corporations split a single $500,000 small business limit. Where each physician keeps their own Medical Professional Corporation and shares rent, staff and software through a formal cost-sharing agreement, every physician keeps their full $500,000 limit. ZAI Wealth Management reviews the agreement with the physician's lawyer and accountant.