The short answer
An Ontario dental or medical professional corporation has three exits: sell it, keep it as an investment company after you stop practising, or hold it until death. A holding company or a standard family trust cannot own its shares, which changes the usual planning. Dentists can often sell; many physician practices have little saleable goodwill.
GuideMost exit planning advice for incorporated business owners starts with two tools: a holding company that keeps surplus and investments apart from the operating business, and a family trust that spreads the capital gains exemption across the family. In Ontario, neither can own a medicine or dentistry professional corporation. That changes every exit.
This guide is written mainly for dentists, whose practices often have real value to sell, and for any dentist or physician who will one day stop practising with a corporation still in place. Physicians have their own section below, because many physician practices have little saleable goodwill and their exit usually looks different. It is orientation, not advice: your accountant, lawyer and, if you sell, a practice broker or valuator do the work. The professional corporation guide covers how the corporation works while you practise.
Ontario's regulation for health profession corporations allows the voting shares of a medicine or dentistry professional corporation to be owned only by members of the College. Non-voting shares can be owned only by a member, a member's spouse, child or parent, or individuals acting as trustees for a member's minor children. A holding company cannot own shares, even one the physician or dentist owns, and both the CPSO and the RCDSO say so expressly. A standard family trust, with adult or future beneficiaries, cannot own them either, as the family trusts guide explains.
That one rule removes four moves that general exit advice takes for granted:
A separate company you own personally, such as one that owns your clinic building, is allowed, but the practice corporation cannot pay it dividends, because that company cannot be one of its shareholders. Any other arrangement between the two companies, including rent, is for your accountant and lawyer to structure, and a second company providing services to your practice needs your lawyer's review first. It is not a way to split income with family: the tax on split income applies to that too.
Most practice corporations also have a single voting shareholder. A sole owner does not need a shareholders' agreement, but does need a will that deals with the shares. Where two or more dentists own the corporation together, a shareholders' agreement sets out what happens when one wants out, becomes disabled or dies, including how the shares are valued.
Every practice corporation ends in one of three ways, and many owners combine them:
The decision is not only about tax. It turns on what the practice is worth, who would buy it, how long you want to keep working, and what the corporation already holds.
In a share sale, you sell your shares personally. The gain is a capital gain in your hands, half of it taxable, and it may qualify for the lifetime capital gains exemption. The buyer, who must be an eligible purchaser under Ontario's ownership rules, takes over the corporation with its history: its tax filings, its contracts and any liabilities.
In an asset sale, your corporation sells the practice's assets, mainly goodwill, equipment and leasehold improvements, and keeps the cash. There are two layers of tax. The corporation pays tax first. Goodwill you built yourself has no tax cost, so the gain on it is generally a capital gain, taxed inside the corporation at investment income rates. Goodwill the corporation bought, for example when you purchased the practice, can also bring back the capital cost allowance claimed on it as income, called recapture, with any proceeds above its original cost a capital gain. Equipment and leasehold improvements work the same way: proceeds up to their original cost can bring back capital cost allowance claimed in earlier years, never more than was claimed, and proceeds above original cost, which is rare for equipment, are a capital gain. Then you pay personal tax when you take the money out as dividends, except for the untaxed half of the capital gain, which goes into the corporation's capital dividend account and can be paid to you tax-free. The capital gains exemption is not available on an asset sale, because the corporation, not you, is the seller.
Sellers usually prefer a share sale; buyers often prefer assets, because they start with a fresh tax cost for depreciation and none of the corporation's history. A buyer who insists on assets may offer a higher price to compensate, or may not. The way to compare two offers is after tax, in your hands, which is a calculation your accountant should run on both before you negotiate. How a capital gain is taxed inside a corporation is covered in capital gains inside a CCPC.
The lifetime capital gains exemption shelters an individual's capital gain on qualifying shares of a small business corporation, up to a lifetime limit of $1,275,000 in 2026, indexed each year. How much you can claim depends on how much of the exemption you have left after any earlier claims and other reductions your accountant will check. For someone who has not used any of it, at the 2026 top Ontario rate on capital gains of 26.76 percent, a full claim is worth up to about $341,000 of tax.
It applies only to a sale of shares, only to individuals, and only if the shares pass three tests:
Passive assets count against you: surplus cash beyond what the practice needs, an investment portfolio, and a life insurance policy the corporation owns. Where the policy insures the life of a shareholder of the corporation, or of a connected corporation, the tax rules value it at its cash surrender value for these tests. A dentist who has saved inside the corporation for twenty years can easily fail the first test.
Two more points. Of a gain sheltered by the exemption, 30 percent is included in the base for the alternative minimum tax, so a large claim can trigger that tax in the year of the sale. And family members who own non-voting shares directly may have their own exemption to claim on a share sale, subject to the same tests: a question to raise with your accountant years before a sale, not months.
Purification is the practitioners' word for removing passive assets so the shares pass the tests. For most business owners it means paying the surplus to a holding company as a tax-free intercorporate dividend. A dental corporation cannot do that, so what is left costs more and takes longer:
Purification is a trade: personal tax paid earlier in exchange for the exemption later. It is worth doing only when the tax saved on the sale is larger than the cost of paying out early, and your accountant should model that before anything moves. The corporate investing guide covers how surplus inside the corporation is taxed in the meantime.
Practices are valued by independent valuators and practice brokers, and the method matters more than any rule of thumb. The common approaches are based on earnings, often a multiple of maintainable earnings after paying the dentist a market salary; on assets, at book value or with assets adjusted to fair market value; or on comparable sales. For a dental practice, the things that move the number include revenue and its trend, the hygiene program, the number of active patients, the location and the lease, and the condition of the equipment.
If you co-own the corporation, check the valuation clause in your shareholders' agreement. The most common mistake is a fixed dollar figure set years ago and never updated, so that a partner's family is bought out at a fraction of the practice's current worth. A formula, or a valuation as of the date of the event, avoids that, and any insurance funding the buyout should be reviewed as the value grows.
Ceasing to practise is a ground for the College to revoke the corporation's certificate of authorization. On revocation the corporation ceases to be a professional corporation, and it must change its name to remove "professional". The share-ownership restrictions in this guide apply to professional corporations, so once your corporation is no longer one, planning they ruled out, such as an estate freeze in favour of a family trust, can come back on the table. Your lawyer confirms the steps, including amending articles that limited the company to practising the profession.
The corporation can then carry on as an ordinary company holding your investments. A few things change:
Closing the clinical practice and dissolving the corporation are separate steps, often years apart.
Closing the practice is about your patients, their records and your College:
Your lawyer handles the lease, staff and supplier contracts, and your College's practice advisors can answer questions on its current requirements.
Dissolving the corporation comes later, and only if you decide not to keep it as an investment company. The corporation pays or provides for its debts, files its final tax returns and distributes what is left to its shareholders, taxed as described above. Before that distribution, the CRA's guidance is to get a clearance certificate confirming the corporation's taxes are paid; distributing without one can leave whoever distributes the property personally liable for unpaid tax, up to the value of what was distributed. With the shareholders' approval, the corporation then files articles of dissolution under Ontario's Business Corporations Act, and it ends on the date of its certificate of dissolution. Your accountant and lawyer sequence these steps.
If you still own the shares at death, you are treated as selling them at fair market value immediately before you die, and the capital gain is taxed on your final return, unless they pass to a surviving spouse, which defers the gain until a later actual or deemed disposition. When the corporation later pays its assets out to your estate, that payment is taxed again as dividends. That is the double tax at death.
Accountants commonly address it in one of two ways. A graduated rate estate that has the corporation redeem the shares within its first three taxation years can elect, in prescribed form by the estate's filing-due date, to carry the resulting capital loss back to your final return, so the value is taxed once, as a dividend. Or the estate uses a pipeline, transferring the shares to a new company in exchange for a note that is repaid over time, so the value is taxed once, as the capital gain on your final return. For a professional corporation, a pipeline runs into the ownership rules above: the new company would own shares of the practice corporation, which the rules do not allow while it remains a professional corporation, and a shareholder's death does not end that status. Your lawyer has to confirm first how any transfer would comply, including whether the corporation must stop being a professional corporation before it happens. Both routes have conditions and anti-avoidance limits for your accountant to design around.
The corporation does not stop being a professional corporation because a shareholder dies, but your executor will have to deal with the shares and the practice within the College's rules, and your will should plan for that. Some owners use a separate will for private company shares to reduce estate administration tax, which is your lawyer's call.
Insurance touches every exit, in five places:
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.
For dentists planning a sale or retirement, the financial planning for dentists page explains how I work with dentists on the investments and insurance around an exit.
The rules in this guide apply to medicine professional corporations in the same way, but the exit usually looks different. Some physician practices have saleable goodwill; many, especially fee-for-service practices, have little. Most physicians exit by closing the practice and keeping the corporation. The CPSO's policy on closing a medical practice sets out what you owe patients, including notice and arrangements for records and how long they must be kept, so read the current version before you set a date.
The capital gains exemption is the same law for physicians, and occasionally it applies. In practice, a medical corporation that has saved for decades holds mostly investments by retirement, and with little goodwill to sell there is rarely a qualifying share sale. The planning that matters more is the drawdown: how the corporation's investments are held under the passive income rules, whether an individual pension plan fits, and how the corporation will be taxed at your death. The financial planning for physicians page explains how I work with physicians on that.
I am a licensed insurance and investment advisor, not a lawyer, accountant or practice broker. Your accountant designs the tax side, your lawyer handles the agreements, the corporation and the will, and a broker or valuator prices and markets the practice. This guide is orientation, so you can walk into those meetings knowing what the options are. Where I can help is the investments and insurance through the exit: what the corporation holds before a sale, how it pays you afterward, and how the tax at death will be paid.
No. Ontario's rules require the voting shares to be owned by members of the profession, and non-voting shares only by a member, a spouse, child or parent, or individual trustees for a member's minor children. A holding company cannot own shares, even one you own, and both the CPSO and the RCDSO say so expressly. A standard family trust cannot own them either.
Sellers usually prefer a share sale, because the gain is taxed in their hands as a capital gain and may qualify for the lifetime capital gains exemption. Buyers often prefer assets, because they start with a fresh tax cost and none of the corporation's history. An asset sale is taxed twice, once in the corporation and again when you take the money out, so compare the after-tax proceeds of both offers before choosing.
Only on a sale of shares, only as an individual, and only if the shares pass three tests: almost all of the fair market value of the corporation's assets used in the practice at the time of sale, more than half throughout the previous 24 months, and no unrelated owner in those 24 months. The lifetime limit is $1,275,000 in 2026, less any part you have already used. A large claim can trigger the alternative minimum tax in the year of the sale.
Once you stop practising, the College can revoke the corporation's certificate of authorization, and the corporation then ceases to be a professional corporation and must remove "professional" from its name. It can continue as an ordinary corporation holding your investments, from which you draw dividends over your retirement years. It no longer earns business income, so its income is taxed at investment rates.
Some physician practices have saleable goodwill, but many, especially fee-for-service practices, have little, so most physicians exit by closing the practice and keeping the corporation as an investment company. The law on the capital gains exemption is the same as for dentists, but a medical corporation that holds mostly investments by retirement usually fails its asset tests.
