You’ve survived the early years. You’ve built your skills, a loyal group of patients, and your confidence. Now your dental practice is thriving. But behind the scenes, is your back office keeping pace?
As your practice grows, so do the demands of running the business. Managing revenue, staff, and compliance can become as complex as the clinical work itself. Whether you’ve already incorporated or are still operating as a sole proprietor, now’s the time to take a hard look at the systems and strategies supporting your practice.
Here are some of the most common issues, and how to avoid them.
1. HST: Don’t Get Caught Off Guard
It’s easy to assume that everything you do as a dentist is exempt from HST. More often then not, this isn’t always the case.
While most core dental services are exempt, certain services like cosmetic procedures, consulting work, or leasing out part of your office, may be taxable. And if you’re earning taxable revenue, you may be required to register for, collect, and remit HST.
This is where many dentists get tripped up. If you’re offering services that fall outside of the exemption, failing to charge HST could result in costly reassessments and penalties from the Canada Revenue Agency (CRA).
Take time to review:
- Which of your services are exempt, and which are taxable?
- Are you claiming input tax credits appropriately?
- Do you need to register for an HST number?
To learn more about HST for dentists, follow this link to the CRA website – Notice 339 – Input Tax Credits Related to Dental Practices (CRA)
2. Payroll Pitfalls: What You Don’t Know Can Cost You
Payroll is more than just cutting cheques.
As soon as you have employees, whether it’s a receptionist, hygienist, or associate dentist, you become responsible for complying with CRA and employment standards requirements. This includes:
- Calculating and remitting source deductions (income tax, CPP, EI) including staying
onup to date with remittance deadlines - Filing T4s and Records of Employment (ROEs)
- Understanding your obligations for vacation pay, severance, and statutory holidays
Many practice owners underestimate the complexity of payroll and find themselves on the wrong side of a CRA audit or facing unexpected liabilities.
If you’re managing payroll yourself, be sure you fully understand your responsibilities. And if you’re not confident in your processes, consider working with a bookkeeper or payroll service provider.
You can learn more about the costs and responsibilities of being an employer here – Employees and the Cost of Owning a Small Business
3. Protecting Your Practice: Don’t Store Wealth in the Wrong Place
Your dental corporation isn’t just a business, it’s also an asset and it’s important to ensure it is protected.
If you’re building up significant assets inside your operating company such as retained earnings or real estate, you could be exposing those assets to risk in the event of a legal claim.
Here are some key asset protection strategies:
- Don’t accumulate wealth inside your operating company
- Use a holding company to own investments, savings, or real estate
- Review your insurance – professional liability coverage alone may not be enough
Putting the proper structure in place can also assist with retirement planning in the future which can include selling your practice. This can be easier when investments are held separately from the practice. Speak with a tax and legal advisor about how to structure your corporations to reduce exposure and protect your wealth.
4. Incorporation and Structural Adjustments
If you’re not already incorporated, now may be the time to revisit the conversation. As your income grows, incorporation can offer tax deferral benefits, greater control over compensation, and options for long-term planning.
If you are incorporated, it’s important to periodically review your structure:
- Is your share structure still serving your goals?
- Are you using a holding company effectively?
- Could income smoothing or retirement planning be optimized?
Check out Should you incorporate your professional practice? to learn more.
Small changes now can help set the stage for a smoother exit when you’re ready to retire or sell your practice.
5. Planning Ahead: Set the Stage for Your Next Chapter
Even if you’re a decade or more away from retirement, the decisions you make now will shape your ability to exit on your terms. Whether you plan to sell, wind down, or pass on your practice, you’ll want to build value and keep your corporate house in order.
Future planning strategies to consider:
- Corporate clean-up: Remove passive investments from your operating company and ensure financial statements are in order.
- Associate succession planning: If you plan to sell to an associate, start grooming that successor early.
- Value-building habits: Ensure your systems, team, and records are strong enough that a buyer could step in with confidence.
Final Thoughts
Your clinical skills may have built your practice, but it’s your business practices that will sustain it. If you haven’t reviewed your corporate structure, payroll systems, or tax strategy lately, now is the time. With the right support and a proactive approach, you can ensure that your growing practice remains financially healthy and that you’re well positioned for whatever comes next.
