Can a Holding Company Own Your Medical or Dental Professional Corporation in Ontario?

Most advice on how a business owner should hold savings starts with a holding company. The operating company earns the money and pays its surplus up to the holding company, which invests it away from the business. If you practise medicine or dentistry through an Ontario professional corporation, that structure is not open to you: a holding company cannot own the shares.

The rule itself is short. What it changes takes longer to explain, and that is what this post covers: what a holding company does for other owners, which of those things you give up, which you do not, and what to do instead. It applies to medicine and dentistry professional corporations in Ontario; other professions and other provinces have their own rules. It is orientation, not legal or tax advice: your lawyer advises on who can own your shares, and your accountant on the tax.

The rule

A professional corporation is an ordinary Ontario corporation with extra conditions, as the professional corporation guide explains. One of them is who may own its shares. For physician corporations, section 2(1) of Ontario Regulation 665/05 says:

Non-voting shares can be owned in only three ways: by a member of the College, by a family member of a voting shareholder (a spouse, child or parent), or by one or more individuals as trustees for a voting shareholder's minor children. Section 3(1) applies the same rules to dentist corporations, with the Royal College of Dental Surgeons of Ontario in place of the CPSO.

A company is none of those, and both Colleges say so in plain words. The CPSO: "Holding companies may not own shares in medicine professional corporations." The RCDSO: "Holding companies may not own shares in a dentistry professional corporation." Neither statement makes an exception for a holding company you own yourself, or for non-voting shares.

What about "directly or indirectly"? You may come across the argument that those words let a member own the shares through a company. The Colleges issue and renew the certificate of authorization your corporation needs to practise, and they state the prohibition without qualification. If you have been told otherwise, have your lawyer check it against your College's published position before anything is filed.

If a company already owns shares. Under the Regulated Health Professions Act, a health profession corporation must not practise when it does not meet the share ownership conditions. If a structure designed for another kind of business was applied to yours, raise it with your lawyer promptly. A standard family trust cannot own the shares either, for the reasons in the post on trusts and professional corporation shares.

What a holding company does for other owners

For an owner who can use one, a holding company owns the shares of the operating company and does three jobs.

1. It generally moves surplus out of the operating company without tax on the move. A dividend from the operating company to the holding company that owns it is generally deductible to the holding company, so profits move up without tax at that step. There are limits. A refundable tax can apply where the operating company receives a dividend refund, and an anti-avoidance rule can treat part of a large dividend as a capital gain in some circumstances, which is the accountant's job to manage. It is also a deferral, not an exemption: the owner still pays personal tax when the money finally comes out of the holding company.
2. It separates savings from business risk. Money left in the operating company is exposed to that company's creditors and to claims against it. Once paid up to the holding company, it generally sits outside their reach, within limits a lawyer would explain, such as the rules against transfers made to defeat existing creditors.
3. It keeps surplus out of the company being sold. With surplus moved up regularly, the operating company holds mainly business assets. That matters for the lifetime capital gains exemption, which requires the company to hold mostly active assets, and it means investments and insurance policies do not have to go with the business when it is sold. Only individuals claim the exemption, never a company, so how the shares are owned is its own piece of planning.

What you give up

Without a holding company, each of those jobs changes.

There is no dividend to a company above. Your professional corporation's shareholders are people: you, and perhaps family members who hold non-voting shares. A dividend therefore goes to a person, and a taxable dividend is taxed in that person's hands. As an illustration, paying yourself $500,000 as non-eligible dividends, all taxed at Ontario's top 2026 rate of 47.74 percent, costs $238,700 of personal tax. An owner with a holding company could generally move the same $500,000 up without tax at that step.

That comparison needs one caution to be fair. The other owner has not avoided personal tax, only postponed it, and you can postpone it too, by leaving the money invested inside the professional corporation. The difference shows up when there is a reason to get assets out of the practice corporation itself, such as before a sale of its shares.

Your savings sit in the same company as the practice. The lease, the staff, the bank loans and the suppliers are all obligations of the corporation that holds your investment portfolio. A professional corporation also does not limit your professional liability: Ontario's Business Corporations Act says a member's liability for a professional liability claim is not affected by practising through a corporation. So the separation a holding company gives other owners is not available between your practice and its retained earnings. What can be done about that, through insurance, contract terms and how much is kept in the corporation, is a question for your lawyer.

The company you would sell is the company that holds your savings. This matters most to dentists, whose practices are often sold. To claim the lifetime capital gains exemption on a sale of shares, almost all of the fair market value of the corporation's assets must be used in the practice at the time of sale, and more than half throughout the 24 months before it, among other tests. A corporation that has saved for twenty years can fail both. Other owners fix that by paying the surplus up to a holding company. Your main routes are paying it out personally, with the tax described above, or using it in the practice, and either is easier spread over time than done just before a sale. On a share sale, the corporation's investments and any insurance policies also go to the buyer with the shares unless they are paid out or transferred first, which has its own tax cost. The guide to selling or closing a practice corporation covers the tests, the options and the asset sale alternative. Many physician practices have little saleable goodwill, so for many physicians this cost matters less.

What you do not give up

Three things are the same with or without a holding company, and they are worth knowing, because a holding company is sometimes described as a tax saving in itself.

• Deferral. Your corporation pays corporate tax on practice income, and you pay personal tax only on what you take out. Leaving surplus in the professional corporation defers personal tax just as leaving it in a holding company would.
• The tax on investment income. Investment income is taxed the same way in a professional corporation as in a holding company. Fully taxable passive income, such as interest, is generally taxed at 50.17 percent in Ontario in 2026, before refunds. Dividends from Canadian portfolio shares generally attract a refundable 38.33 percent tax instead, and only half of a capital gain is taxable. Either kind of company has the same refundable tax account and the same capital dividend account for the untaxed half of capital gains.
• The passive income rule. A holding company would not get you around the federal rule that reduces the small business limit. The test adds up the previous year's adjusted aggregate investment income of your corporation and every corporation associated with it, and the limit starts to shrink once that total passes $50,000. A holding company's investment income would therefore count against your practice's limit just as the professional corporation's own income does. The corporate investing guide explains the rule and what it costs in Ontario.

What you lose is separation, and flexibility when you exit, not a lower tax rate on your investments.

Why a separate company you own is not a substitute

Nothing stops you from owning a second company personally, alongside your professional corporation. Some physicians and dentists do, most often to own the clinic building. It is not a holding company in the sense above, for four reasons.

1. It cannot receive dividends from your professional corporation. Dividends go to shareholders, and that company cannot be one. Any other arrangement between the two companies, such as rent or a loan, has its own tax rules and is for your accountant and lawyer to structure.
2. If you control both, the two companies are associated for tax. Associated companies share one small business limit, and their passive investment income is counted together for the federal passive income rule. The tax rules also include an anti-avoidance provision aimed at lending or transferring property to a related company to get around that count.
3. It is not a way to split income. Family members can own shares of a company that does not practise the profession, but the tax on split income generally applies to dividends they receive from a business related to you, unless an exception applies.
4. It needs a real purpose. A company that owns your premises or provides services to your practice has to be set up and priced properly. Have your lawyer and accountant review it before it is created.

What to do instead

The practical answer is to make the professional corporation do a holding company's job as well as it can, and to move savings into places that sit outside it by design.

• Invest inside the professional corporation, deliberately. It is allowed. The Business Corporations Act limits a professional corporation to practising the profession and related activities, and says those include "the investment of surplus funds earned by the corporation". What you hold, and how much income it produces, decides how the passive income rule affects you. The passive income calculator shows the effect on your numbers.
• Use registered plans, which sit outside the corporation. Salary creates RRSP room, as the salary vs dividends guide explains, and for some established owners an individual pension plan lets the corporation fund a pension with deductible contributions. Investment income earned inside these plans does not count toward the passive income rule.
• Consider corporate-owned life insurance where there is a real insurance need. Growth inside an exempt policy does not count as passive investment income, and when a private corporation receives the death benefit as beneficiary, the proceeds less the policy's adjusted cost basis are generally added to its capital dividend account. It does not replace a holding company either: where the policy insures a shareholder, its cash surrender value counts as a passive asset in the capital gains exemption tests. The corporate-owned life insurance guide covers when it fits.
• If a share sale is possible, start early. If the corporation has failed the 24-month asset test, restoring eligibility may require a fresh 24-month period.
• Know what changes when you stop practising. Once the College revokes the certificate of authorization, the corporation is no longer a professional corporation and the ownership restrictions no longer apply to it. Planning that was closed while you practised can then be reconsidered with your lawyer and accountant.

Disclosure: I am a licensed insurance and investment advisor and life insurance is among the products I place, so have your lawyer and accountant review any structure, including one I suggest.

Questions for your lawyer and accountant

1. Who owns each class of shares in my professional corporation today, and is any company or trust among them?
2. What passive assets does the corporation hold, and what would it cost in personal tax to take them out?
3. Is a sale of shares realistic for my practice, and if so, does the corporation pass the asset tests today?
4. If I own or want a second company, what is it for, would it be associated with my professional corporation, and what would that do to my small business limit?
5. What changes for the corporation when I stop practising?

The financial planning for physicians and financial planning for dentists pages explain how I work with each profession on what the corporation holds and how it pays you.

I am a licensed insurance and investment advisor, not a lawyer or an accountant. Who can own your shares is your lawyer's question, and the tax is your accountant's. This post is orientation, so that advice written for other kinds of business does not get applied to your corporation without that check.