Time is Money
One of the principles we try to instil in physicians is the notion of “time is money”. Accountants know this by their very nature – everything we do for clients is based on a chargeable hour.
Doctors can have a different perspective: your patients need health care, there is a line of people in the waiting room, and each of them has a peculiar need, and a desire for personalized care.
The workday is long, and the last thing you need is to spend your precious time off doing accounting work. Delegate that to somebody who does it all the time!
You spent three times as much time in college as your stockbroker (who probably took political science, or geography . . . ) – yet it seems he or she is driving a better car than you are! Why would that be? The answer might be that they know the secrets of leveraging your time, and concentrating on what pays the most. Lohn Caulder can help identify those areas.
Advantages of Incorporation
Physicians in Canada are generally well-advised to incorporate. The size of their income “fits” very well to the low-rate incentives offered to all businesses (13.5% on pre-tax corporate income, to a maximum of $500,000 per year).
If your personal living expenses amount to something less than your actual annual income, then incorporation can save you significant taxes. The difference, being your annual savings, can be accumulated inside the corporation, in an investment account of some sort. Some prefer to accumulate in the professional corporation itself, but the preferred approach is to do so in a dedicated holding corporation (keeping the accumulating income hopefully free of concerns and issues that can ‘orbit’ an active business – especially in a relatively high-risk activity, such as health care).
Can’t save any money? Well, perhaps one reason is that your college-age children are busy spending a good portion of what you make! In such a case, corporations can still work to save you taxes. There might not be any significant accumulation of cash, but with the combined effect of dividends allocated from a properly-designed family trust, or via discretionary, special-purpose classes of shares in the corporation, we can ‘engineer’ a situation where your children effectively end up declaring income that would otherwise have been declared by you, at no, or very low, tax cost overall.
We can also advise on the often-misunderstood advantages of a fiscal period that is not the calendar year. Most of our physician-clients take advantage of this very useful and practical method of maintaining control over budgets, and tax burden. Our objective: never having to tell you that you need to find $25,000 by the end of the week (for taxes). We can provide a system for avoiding that kind of bad news – and it all revolves around budgets and projections of the future. While that can be very difficult for many businesses, the medical profession is often quite easy to budget. We can show you how.
Taking Hold of your Savings Objectives and Strategy
We like to encourage clients to think of their holding companies as their ‘retirement funds’. Developing an enthusiasm for saving and investing is one very useful side-effect of the use of holding companies. In fact, we can assist and consult on the matter of management of the accumulating money. All too many professionals turn their savings over to high-cost money managers, whose remuneration is masked by the way they can charge your investment funds, directly. We encourage our clients to consider alternatives – perhaps even managing the money themselves, through discount brokerages and the like. We appreciate that such a notion is often received negatively, because the average person considers investment to be a very scary and risky proposition. Thus, they end up overpaying for investment advice. It pays to discuss the alternatives with us – we’ve seen a lot of different approaches to this challenge. And the best part: we’re impartial, and unbiased. All we can do is charge you for our time. Whatever financial product or investment you buy is up to you, and makes no impact on what we are paid. That’s why Lohn Caulder Chartered Accountants are the No. 1 trusted advisor in our client’s lives.
Tax Credits Available In Some Specialty Areas
Did you know that physicians can make claims for ‘scientific research and development’ tax credits? If you are engaged in some area of medical specialty in which the bounds of medical knowledge are being pushed out, via clinical trials, lab research, learned treatises, etc., or if you have a medical device or process that has been patented or may be patented, it may very well be that your activities will qualify for credit. We have many medical professionals who have successfully made claims, and Lohn Caulder can assist in the process.
Did you know that sometimes it makes little sense to pay off debt? That can be true, if finances are generally tight, and you have some debt that was incurred for business purposes. If so, the interest on such debt is tax deductible. And, at least these days, the interest is at or near record lows. Therefore, we can illustrate how expensive, from a tax perspective, it can sometimes be to pay off debt. For instance, a personal debt bearing interest at 3% could cost as much as 30% in tax to pay off. If rates remained static, that’s 10 years of interest!
Thus, low-rate personal house mortgages are best left to amortize themselves. Physicians with an efficient corporate structure should be able to accumulate far more savings, and get richer faster, by not making extra debt payments, but rather concentrating on building that holding company fund.
Personnel and office costs can get out of control. We’ve got a lot of experience with this area – in fact, we deal with it in our own business. Let us help you draw on our experience!
Premises and equipment leases are another big area. We can help when it comes time to negotiate such contracts.
The upshot: When it comes to helping physicians make a financial success from their chosen profession, think “Lohn Caulder Chartered Accountants”!
Lohn Caulder has provided our family with outstanding accounting service and expertise. In fact, so much that I strongly recommended Lohn Caulder to my medical group, who are now highly satisfied clients.Dr. Gordon Andrews, Radiologist
Kelly and his team have looked after my, and my family's, accounting needs for 35 years. I have always enjoyed exceptional service. Have recommended Kelly to many of my friends.Derryck Smith, MD, FRCPC, Clinical Professor Emeritus, UBC