Canada: A Cost Sharing Agreement Might Be Good For Your Medical Practice — Or Not!

We recently met with one of our clients, a general practitioner, who was in the process of taking on an associate. His past experience with governance matters, especially around the fair and equitable splitting of costs, led him to us. He knew that before going forward he had to formalize the business relationship through a written agreement.

There are many business structures available for medical professionals, including unincorporated, incorporated and partnership structures. We determined that the best fit for our client's particular circumstances was an unincorporated one known as a Cost Sharing Agreement (CSA).

A typical CSA can be quite complex but will have four major components, covering: the governance of the arrangement, the business relationship of the parties, the allocation of practice costs to each practitioner or their medical professional corporation as the case may be, and the withdrawal, retirement or death of a practitioner.

To help you determine the best structural fit for your situation, here are some of the advantages and disadvantages of a CSA.


  • Each participant in the CSA may have his or her own incorporated practice. As long as the CSA is not construed to be a partnership, this should entitle them to the small business deduction (SBD), which results in a tax rate in Ontario of just 15.5% on the first $500,000 of taxable income. In a partnership structure, on the other hand, the $500,000 SBD must be shared amongst the partners.
  • Each practitioner can maintain control of his or her own medical practice and, at the same time, benefit from the sharing of common expenses with the other practitioner.
  • Each practitioner owns his or her own medical equipment and therefore can maintain separate tax accounts for it, as well as make discretionary deductions, such as tax depreciation.
  • Given the agency relationship between the practitioners under a CSA, the sharing of expenses is not considered to be a reimbursement of expenses by one party to another. This means those expenses are not subject to HST, as they might be under a structure where reimbursement could be considered a re-supply of the goods or services.


  • Each party to the CSA is considered a "de facto" employer in respect of shared employees, and all risks associated with the shared employees are borne by both parties.
  • Shared employees will be employed by both practitioners under the CSA. This means both the employees and the practitioners may be exposed to double withholding of Canada Pension Plan (CPP) and Employment Insurance (EI) premium contributions. While employees can claim a refund of this over-contribution when they file their tax returns, the CSA practitioners cannot. These over-contributions in respect of the shared employee will be a cost of doing business under a CSA.
  • If a shared employee is injured while working in the common premises, both practitioners may be exposed to liability even if the employee was performing services for only one of them when the injury occurred.
  • There is a risk that the Canada Revenue Agency (CRA) may view the relationship as a partnership even with a CSA in place, particularly if there is any revenue sharing under the agreement. In determining whether the relationship between the participants is carried on in common, CRA may consider the following:
    • Is there a collective sharing of profits and losses?
    • Is there a central management that the practitioners must adhere to?
    • Is there joint ownership of equipment used in the operation of the practice?

If the answer to all three of these questions is "yes", then the CRA may be inclined to construe the CSA relationship as a partnership.

As the expression goes, "if you fail to plan, plan to fail". So if you intend to work together with one or more other practitioners in some capacity, we highly recommend that you draft a formal agreement. It's like a marriage contract for the business, allowing you to agree on the best course of action up front and cover the various circumstances that may arise.

Determining the best fit for you is where we at Crowe Soberman can add value to the process. We'll help you make the right diagnosis!

About the Authors

Alan Wainer is a partner in the Audit & Advisory practice at Crowe Soberman LLP. He is also a leader of the firm's health industries practice where he assists doctors and other clients working in medical practices and senior care facilities. .

As a member of Crowe Soberman's tax Group, Silvia Jacinto advises businesses and high net-worth individuals on tax matters including corporate reorganizations, tax planning for Canadian inbound investments, personal tax planning, partnerships and trusts planning, corporate tax compliance, and acquisition and exit-strategy planning..

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Alan Wainer CA, CPA, CPA (Illinois)
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