Since taking office, the Trudeau Government has introduced higher tax rates for those earning the most (i.e. those who’ve worked hard to build their business).
The Trudeau Government has eliminated the previous government’s income splitting among family members tax benefit, which was designed to help one-earner families where the other spouse stays home to take care of children. They’ve now taking aim at the use of professional corporations to split income among family members by paying dividends (details coming in the next few months about this one!).
There’s also been historical talk / rumour about changing the rules for corporations to qualify for the 15% small business tax rate (you would need to have a certain minimum number of employees) AND increasing the inclusion rate for the lifetime capital gains (from 50% to 75%).
The Trudeau Government doesn’t seem to care if you have a pension built up in your professional corporation; they want to force you to spend your hard-earned money hiring people you may / may not need and NOT keeping money in your bank account for rainy days and retirement. They want you to pay more taxes to help pay for their infrastructure plan – which by the way, we have NO IDEA how much it will end up costing!
They are unfairly casting a wide and destructive net across all of Canada’s small business owners – which employ 80% of Canadians! Taking away these tax benefits makes wanting to do business in Canada LESS ATTRACTIVE. They are contributing to another brain drain (like in the past, when smart doctors and professionals threatened to leave unless they had certain tax benefits put into place).
We need dentists, doctors, and other small business owners to WANT to come and stay in Canada, hire employees, and be able to save for their own retirement. They feed entire industries and by unfairly targeting them, we make Canada look way too socialist. Why should the government strip away tax benefits for those who took risks to start their own business; who have to think about their businesses day and night; who need to worry about regulations / insurance / taxes / dealing with professionals. Everyday employees don’t have these burdens. They shut off at 5:00 p.m. and don’t worry on weekends. If they lose their jobs, they can find another. If a small business owner like a dentist goes bankrupt, they lose it all and have a social stigma. There’s more risk to having your own business; so the rewards should be greater. That’s how capitalism works!
The Trudeau government should stop picking on those who risk more and add such great value to our wonderful country. And stop trying to tell us what we should be doing with our money by punishing us if we don’t toe the Liberal Party’s line!
Just some thoughts…
Yes, it’s true. The Ontario Ministry of Finance has started to audit dentists in order to ensure they have paid enough Employer Health Tax (EHT) for all employees. And they’re disputing dentist’s characterization of hygienists and associates as independent contractors (instead of employees)(! If they believe they should have been employees, then the practice would be on the hook for paying EHT, plus interest and penalties!!!
This is VERY BIG NEWS because, industry wide, many associates are considered independent contractors and their contracts are set up in that manner. But just saying in an agreement that a hygienist or an associate is an independent contractor ISN’T ENOUGH to actually make them so.
Canadian courts use the following four-fold criteria to determine whether a person is legally considered to be an independent contractor:
See Montreal v. Montreal Locomotive Works Limited,  1 DLR 161 (PC); Wiebe Door Services Ltd. v Minister of National Revenue,  2 CTC 200; and 671122 Ontario Ltd v Sagaz Industries Canada Inc., 2001 SCC 59.
Individuals who exert control over their own work, own their own tools, have the chance to profit and run the risk of loss will generally be considered independent contractors.
Importantly, the Supreme Court has held that there is no conclusive test to determine whether a person is an independent contractor or an employee The Courts will look at the totality of the relationship to determine if an individual is an employee or an independent contractor. More specifically, all of the facts must be considered in light of the common understanding of the parties’ legal relations. In other words: (1) was the subjective intention of the parties established or reflected in writing and / or by action and (2) does the objective reality, based on the four-fold criteria set out by the courts, sustain or deny the subjective intention of the parties?
See Royal Winnipeg Ballet v. Minister of National Revenue (2006), 2006 CarswellNat 2425 (Federal Court of Canada).
If you’ve been contacted by the Ontario Ministry of Finance about this, contact DMC LLP immediately and we will work with you to help get you the best possible results. If you haven’t been contacted yet, contact DMC LLP right now to help PREVENT this from happening by having your contracts drafted properly and the realities reflect a more truly independent relationship.
Last week, David Mayzel and I attended the 4th Annual Definitive Conference on Dental Service Organizations in New Orleans put on by the leading U.S. law firm in that space, Dykema. It was packed (probably over 1,000 attendees) with vendors, DSOs, dentists, investors, and lawyers…. lots of lawyers ;-).
By way of background, DSOs are typically non-dentist corporate entities that provide business and administrative support to dental offices which they are affiliated with. They may own certain parts of the dental practice (not the professional goodwill), but they team up with a dentist who acquires the professional goodwill through a professional corporation. There’s also a business services agreement between the DSO entity and the dentist who owns the professional goodwill for the provision of such services to the dental office. The DSO can own the equipment and rent it back to the dentist, provide marketing and HR support, provide custom and enterprise level practice management solutions, etc.
Here’s what we learned:
So what does this tell us about DSOs in Canada? Well, we believe that they will start to make significant inroads into the dental marketplace. Right now, there are only a few players operating north of the border, but we believe there will be an influx for these reasons:
Over the next series of blogs, I’m going to get more and more into what’s been happening over the past few decades in the U.S. and talk about how things are coming along in Canada.
As we expected, the Ontario Government announced how they are going to update employment and labour laws in Ontario. After the lengthy Changing Workplaces Review was completed this month, the government moved fast to tell us which of the recommendations they would implement.
Dentists in Ontario should take note of the following updates to the law that will likely come into effect in 2018 or 2019: Read more
Filed under Blog, Dental Hygienists, Staff · Tagged with $15, $15 minimum wage, 3 hour payment, changing workplaces review, dentist lawyers, DMC LLP, employee, employment law, employment standards, ESA, esa enforcement, holiday pay, independent contractor, Jonathan Borrelli, jonathan n borrelli, minimum wage, ministry of labour, on-call, overtime, paid vacation, refusal to accept shifts, schedule changes, training
A very large component of what we do at DMC LLP is assist sellers and buyers in transitioning. And we notice things. For example:
Buyers Are Getting More Sophisticated
Buyers – thanks to us educating them, no doubt! – are becoming more sophisticated. It typically takes 3 months from the time an LOI is signed up until the closing is finalized. But now, because buyers are paying more attention to the little things, it’s taking longer in some cases. Buyers are looking at the employee details, doing proper chart audits and equipment inspections, having a dental accountant review the financials, having their lawyer review the lease (to see if there’s a demo or relocation clause). And this sometimes leads buyers to ask for price reductions – for example, if equipment needs to be fixed / repaired or if the appraisal was wrong when it represented there being [x] number of patients who attended the practice.
Banks Are Scrutinizing More Too!
Banks are still financing the purchase and sale of dental practices for 100%+ at prime (currently 2.7%), BUT they are pushing back on a number of fronts. First, they’re calling B.S. on appraisals that are over the top. Certain appraisal companies are known for being very aggressive in their valuations. They do this by over-appraising equipment. Or not factoring in what the TRUE earnings before interest / taxes / depreciation will be (for example, because they don’t look at whether associate fees to a third person need to be paid out of that before the purchaser needs to pay the bank and themselves). At the same time, Banks are looking for nasty clauses in leases that could impact a dentist’s ability to repay the loan – like a demolition / relocation clause. And on top of that, they’re coming up with projections that may require that certain key team members (like hygienists and associates) sign new contracts on closing so that they show that they are both (1) staying and (2) promising not to compete / solicit patients or staff elsewhere. Finally, banks are definitely tightening up on consolidator dentists. If you own 2 practices for example and you want full financing on the next 3, the banks may consider this a bigger risk and ask you to throw in some of your own money.
Landlords Are Still Greedy
Landlords are still asking for money in one form or another. We’ve seen them (with absolutely no right to do so) ask for 5% of the purchase price PLUS the requirement to see the purchase and sale agreement as part of consenting to an assignment of the lease. If they don’t get that, then they’ll ask for $5k as their “reasonable” transfer fees (which may or may not include legal fees). Those in higher end areas are asking for rent AND security deposit which could amount to between $10-$20k! And, finally, to top it off, they’re still demanding that the sellers stay on to GUARANTEE the lease (in case the new tenant defaults) for the remainder of the term – however long that might be AND including renewal options.
Great practices with solid fundamentals (good location, hygiene program, lots of room for expansion, large + loyal patient base, great cashflow, etc.) are still selling for way over appraised and on the Seller’s terms. BUT we are witnessing something new for practices that are just average or below average: they are selling for LESS than appraised. It has a lot to do with more practices coming on the market, coupled with more sophisticated buyers and bankers who are scrutinizing practices more. We’re also seeing buyers and sellers ask for conditions that we’ve never seen before. For example, a buyer wanted to associate a few days AT a practice BEFORE buying it (which opens up a whole can of legal worms). Another buyer wanted the Vendor to do patient introductions for a set period of time (e.g. 3-6 months) before the Vendor can leave / retire. And some buyers ask for things like liquidated damages clauses, chart fees, and enhanced non-treatment of patients clauses. Just because these things are being asked for doesn’t mean they’re getting them. Now, for their part, sellers are afraid that things might not work out between themselves and the buyer and want to create exceptions to the restrictions (non compete, non solicit) that they’ve agreed to. They’re also insisting on things like being able to select their own assistant and getting certain hygiene or lab fees included in their compensation. Again, just because they’re asking for it doesn’t mean the buyer will accept.
David Mayzel is your legal risk manager. He is a trained courtroom lawyer and has spent many years resolving disputes both in and out of court. He knows how to prepare documents and execute transactions in a way that avoids or mitigates legal risks. He can be reached at 416.528.5280. or firstname.lastname@example.org.
Michael Carabash is your business law adviser. He is an entrepreneur at heart who helps you see the big legal picture. He drafts clear and effective agreements that protect your rights while promoting your interests. He can be reached at 647.680.9530. or email@example.com.
Ljubica Durlovska is your transition lawyer. She helps you with staff and associates, maintaining your corporation, and other business matters. She can be reached at 416.443.9280, extension 206 or firstname.lastname@example.org.
Jonathan Borrelli is your employment lawyer. He helps you with staff and associates matters, including hirings, terminations, switching staff to written contracts and resolving disputes. He can be reached at 416.443.9280, extension 204 or email@example.com.
Benjamin Kong is an experienced business law clerk. He assists David and Michael with corporate matters and purchase / sale transactions. He can be reached at 416.443.9280, extension 207 or firstname.lastname@example.org.
Julie Whitehouse is an experienced business law clerk. She assists David and Michael with corporate matters and purchase / sale transactions. She can be reached at 416.443.9280, extension 203 or email@example.com.
David, Michael, Ljubica, Jonathan, Ben and Julie are a truly dynamic team. Their diverse knowledge, skills, and experiences will help you get the best deal possible while promoting your interests and protecting your rights. You can read dentist testimonials here.