Can my spouse be a shareholder of my MPC in Ontario?
Yes. Business Corporations Act (Ontario) s. 3.2(4) permits an Ontario Medical Professional Corporation to issue non-voting shares to the physician’s spouse, child (of any age), or a trust for a minor child. Voting shares must be held by the physician. This is the structural basis for family-share income splitting via non-eligible dividends, subject to TOSI.
Structure. Articles of incorporation define at least two share classes: Class A voting common (held by the physician) and Class B non-voting family shares (spouse, child). Both classes participate in dividends and residual property on wind-up, but only Class A votes at shareholder meetings.
TOSI (Tax on Split Income under ITA s. 120.4) since 2018 largely neutralized the historical tax benefit of dividending to spouse and adult children unless an exception applies. Exceptions include: dividends to a spouse who has attained age 65 (spousal-retirement exception); dividends from an excluded business where the recipient works 20+ hours/week over the year and either the current or five preceding years; dividends from excluded shares held by an adult 18+ where the recipient’s contribution is substantial.
Example: an Ontario physician (age 60) with an MPC pays $50,000 non-eligible dividend to his 65-year-old spouse who does not work in the practice. TOSI does not apply due to spousal-retirement exception (s. 120.4(1) ‘excluded amount’ (g)); dividend taxed at spouse’s marginal rate, likely well below the physician’s 53.53%. Tax saving in this common fact pattern: $10,000 to $15,000 per year.
Non-voting family shares also help with LCGE multiplication – each family shareholder can potentially claim their own $1,275,000 LCGE on the MPC’s eventual sale, subject to the 24-month tests.
Note: Dental PCs mirror the same rules (OBCA s. 3.2 for dentists). Legal, accounting, engineering PCs generally cannot issue non-voting family shares – check the specific regulator rule.
Source: cpso.on.ca â MPC share ownership
— Bader A. Chowdry, CPA, CA, LPA — Insight Accounting CPA
Disclaimer: Bader A. Chowdry, CPA, CA, LPA is a Licensed Public Accountant regulated by CPA Ontario. Insight Accounting CPA Professional Corporation is a Chartered Professional Accountant firm. This content is general information only and does not constitute professional advice for your specific facts. Confirm current rules and figures with your own advisor before acting.