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The first in a five-part series on what you need to know at various stages of your professional practice.
We often have conversations with our medical professional clients that start something like this: “I was visiting with a colleague the other day between cases and they were telling me I should…”
The ideas shared during these visits are likely good ideas, but the key is to understand that what might be the right idea at the right time for your colleague may not be the right idea for you at this time. It is important to recognize your career decisions will uniquely match your personal circumstances and needs.
Every professional practice goes through a series of stages in its evolution. From a tax perspective, failure to plan properly at each stage of your practice lifecycle may result in significant financial consequences or lost opportunities down the road. The first step to effective tax planning is to understand what stage your practice is at today.
Getting Started: As you embark on your medical practice, you need to choose an initial structure that will match your initial financial goals. These goals likely include retirement of any remaining education debt and looking towards a possible home purchase. Consideration should also include your current personal circumstances. Do you know where you plan to build your practice? Are you married? Do you have children or other dependents?
Creating a Financially Efficient Practice: At this point, your practice has demonstrated to you that you will be able create financial resources to meet your personal cost of living and accumulate wealth for your future financial goals. If you have not already done so, incorporation of your practice can usually add more power to your savings.
Wealth Accumulation: At this stage, you are enjoying a very profitable practice that is creating the financial resources for an expanding list of personal and financial goals. You are not likely ready to retire but you can start thinking about how you want your retirement to look and structure a plan to get there.
After Practice: A very common reminder to our medical professional clients is “you don’t give the money back after you stop practicing.” The wealth you have accumulated now needs a plan that works with your retirement savings (RRSP or IPP), government benefits and other income sources. This will include estate planning, income tax minimization and capital gains considerations.
Over the next several articles, we will look at each of these stages in more depth to point out how your tax structure and strategies should evolve as your practice grows.
With more than more 12,000 Professional Services clients, MNP has developed a diverse suite of services designed to provide a collaborative, cost-effective approach to doing business and personalized strategies to help professionals succeed at every stage of their practice.
Contact Don Murdoch, B.C. Leader, Professional Services at 1.877.766.9735 or [email protected]
Related Topics:Doctors; Business Structures
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