Buying into a dental practice: what the structure decides

The structure decides what you get to deduct, and the two structures are not close. Buy the practice’s assets and you get a fresh cost base to write down — equipment, leasehold improvements, and the goodwill that is most of the price — plus interest on the borrowed money, deducted against practice income in the same corporation that earns it. Buy the shares and you get none of that: the price becomes the tax cost of shares you may not sell for thirty years, and the corporation’s depreciation balances carry on from wherever the seller left them. Which one you get is negotiated, not chosen, because the seller’s tax result runs the other way.

Most buyers meet this after the price is agreed, which is backwards: the same headline number is worth different amounts to each side depending on how it is papered.

What an asset purchase puts on your books

Your corporation buys the chairs and imaging, the leasehold improvements, the patient records and the goodwill, and each piece lands somewhere different. Equipment goes into a capital cost allowance class — CCA, the tax system’s version of depreciation — written down on a declining balance at a rate set by that class. Leasehold improvements have their own treatment. Goodwill and the patient list go into the intangibles pool, Class 14.1, which comes back on a declining balance at a low prescribed rate. The largest line in the deal gives itself back the slowest.

The allocation is the negotiation inside the negotiation. It has to be reasonable and supported, both sides generally report it the same way, and the CRA can revisit it — at purchase and again when you sell. The land-versus-building split works the same way.

One 2026 note. Bill C-15, law on March 26, 2026, brought back the accelerated investment incentive — an enlarged first-year deduction in place of the usual haircut — though whether it reaches goodwill as well as equipment is a question for whoever prepares the first return. Its separate immediate-expensing list is short and not written for a dental fit-out.

Sales tax is the part dentists find late. Where a buyer acquires substantially all of the assets of a business, the parties can generally jointly elect so that GST/HST does not apply to the sale itself. It matters here because a practice has billings that are part exempt and part taxable for GST/HST, and that mix decides how much of the tax on your own costs you recover. Unrecovered tax is not a wash — it is part of the price.

What a share purchase puts on your books

Almost nothing. The price becomes the adjusted cost base of the shares — the tax cost your eventual gain is measured against — and that does nothing until there is a disposition. Inside, the corporation carries on with the pools it already had: the chair bought six years ago sits at whatever is left of its undepreciated capital cost, the running balance of what the pool has left to give, and you inherit that balance rather than a fresh cost.

You inherit the rest of it too — old returns, payroll accounts, GST/HST history, whatever is contingent and undiscovered — which is why most buyers prefer assets. Buying control is also a tax event for the corporation itself: an acquisition of control generally triggers a deemed year-end and restricts what the target can do with earlier losses, so a practice with three lean years behind it is not carrying three years of shelter across to you.

What it does buy is continuity — same corporation, same lease, same contracts, same registrations, nothing to assign or consent to.

Where the debt sits decides more than the rate on it

Interest is deductible where the borrowed money is used to earn income from a business or property, and the system traces the use of the money rather than the name on the loan. That sentence separates the two structures.

Borrow inside the corporation to buy assets it will use, and the interest is generally deducted against practice income on the same T2 — the corporation’s income tax return — that reports it. Borrow personally to buy shares, and interest on money borrowed to acquire shares is generally deductible where there is a reasonable expectation of income from them, but you are now paying principal with dividends or salary that reached you after personal tax. The income sits in one place, the debt in another, and the distance costs money every year of the loan.

That mismatch is why buyers ask about moving the debt to where the income is — a purchaser corporation that borrows and is then amalgamated with, or wound up into, the practice. It is done, it has conditions attached, it is a legal step as much as a tax one, and for a professional corporation it meets the constraint below first.

Your college decides who can hold the shares

Before any structuring, there is a question the CRA has no view on: provincial college rules that limit who may hold shares of a professional corporation. Those rules are set by your college rather than the tax system, they vary, and they decide whether a purchaser corporation, a holding company, a spouse or a family trust can appear on the share register at all. A structure that works cleanly for a plumbing company can be unavailable to you. Your lawyer confirms the position first; what you do with the earnings inside the PC comes after.

Going from associate to owner changes several filings at once

Most buy-ins start from an associateship — paid through the clinic’s payroll, on contractor invoices, or partly each. Ownership changes what you file, and the changes arrive together:

• A corporate return where there wasn’t one, and a first fiscal year-end to choose. The first 90 days is the rest of that setup.
• Payroll accounts, if you are now the employer of the hygienists and front-desk staff rather than an associate working alongside them.
• Personal instalments, generally once your net tax owing tops C$3,000 in the current year and in either of the two years before it — C$1,800 for Quebec residents. The deadline table has the dates.

An associate who incorporates and invoices a single clinic can also raise personal-services-business questions, and a partial buy-in that leaves you invoicing a practice you part-own does not end them.

A worked example: C$900,000, one price, two papers

Illustrative, round numbers, December 31 year-end. You are buying a solo practice for C$900,000, borrowing C$700,000 of it.

Papered as an asset purchase, the price gets allocated — say C$120,000 to chairs, imaging and equipment, C$60,000 to leasehold improvements, C$720,000 to goodwill and patient records. The C$180,000 of tangible assets depreciates at ordinary class rates, the first year enlarged by the reinstated incentive where it applies. The C$720,000 sits in the intangibles pool and returns over decades. The corporation did the borrowing, so the interest lands on the return that reports the practice income.

Papered as a share purchase, C$900,000 becomes the tax cost of your shares and nothing else happens. The equipment inside carries on from balances the seller has been claiming against for years, you take the filing history with it, and the corporation’s year is deemed to end the day control changes. Borrow the C$700,000 personally and the interest deduction sits on your return, against income you pull out of the corporation to service it.

Same C$900,000. In the first case most of it is on a schedule; in the second, none of it reaches a return until you sell.

The seller sees the mirror image, which is why the price moves with the structure. On a share sale their gain can be sheltered by the lifetime capital gains exemption — C$1,275,000 for 2026 dispositions of qualified small-business-corporation shares, against a gain included in income at 50%. On an asset sale the proceeds land in their corporation with a second layer of tax ahead of them. Whether their shares qualify is best answered before the structure is agreed.

What Cadence does

We work the structure alongside your lawyer while the letter of intent is still a draft — the allocation, where the borrowing sits, what your college permits on the share register. All three get harder to move once the agreement is signed. We do not audit or review the practice’s financial statements; that is assurance work and we refer it out. What we do is read the returns, the CCA schedules and the GST/HST history you are being asked to inherit, then set up what follows: the corporate return and your personal return in the same file, the registrations the first year needs, and the instalments after it. The Business Tax Compliance package covers the annual returns; the deal-year questions are planning work, inside the year-round packages. That is where dentists and other incorporated health professionals usually start with a deal already in front of them.