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Small Business Owner or Doctor? How About Both?


First things first: Congratulations to all the doctors who recently completed their residency and are now embarking on their brand new small business careers this summer. If you are planning to work as a locum or join or start your own clinic, this means you!

My opening comment above was specifically worded for effect. Many doctors don’t recognize they are in fact embarking on a small business career as they join, start or become a locum at a clinic. Understanding the responsibilities and opportunities that flow from that realization is both important and daunting. The purpose of this article is to provide you with some business management basics to start you off in the right direction.

Understand Where You Are Coming From

While completing your residency, you received employment income. Your employer withheld income tax, paid Canada Pension Plan (CPP) and Employment Insurance (El) premiums on your behalf and remitted these to CRA. Your paycheques during your residency should have been very close to your “after-tax paid amounts” and no surprises should be coming your way when you file a 2014 Personal Income Tax Return for this income source.

When starting your own practice, having someone else take care of paying your income tax stops. The money you make from locums or opening up your own clinic includes the income tax and CPP benefits you will be required to pay when you file your 2014 Income Tax Return.

You would be wise to develop a financial plan for your small business in order to estimate the income tax and CPP you will owe.

There are some opportunities that will help you manage your income tax owing. Many new doctors have unused tuition credits accumulated during your academic years. Because these tuition credits are tax credits and not tax deductions, they save you the same amount of income tax no matter when you use them, so plan to use them in 2014 to save some tax right away. Do you know how much you have carried forward?

As the owner of your small business, you will not be required to contribute to Employment Insurance (El). This can save you money, but this means you are also not eligible to claim El benefits from a period when you are not paying premiums.

Pay Back Your Debt

Most new doctors likely have taken on some form of debt to support their education or living expenses while obtaining their medical license. It was not a mistake to borrow the money to invest in yourself – after all, you’re now a graduate of medical school. But it is a mistake to not have a debt repayment plan. It’s important to factor in how the cash flow from your small business will be used to pay down at least part of your debt.

Don’t Try To Do Everything Yourself

When you’re starting a new business of any kind – including a medical practice – the demands are intense and constantly changing. You’ll be challenged to balance the health of your patients with the health of your business – and you really only went to school for one of those two things. When you’re starting out, seek guidance from experienced business and accounting professionals that understand the stages of your career and know how to help you succeed personally and professionally through every phase.

With 16 locations throughout B.C., MNP provides support to medical professionals at all stages in their careers. Visit to learn more.

To learn more, contact Don Murdoch at 250.763.8919 or [email protected], or your local MNP Advisor