A professional corporation can also provide opportunities for income splitting, which can lower the overall tax burden. Income splitting allows business owners to distribute income to family members in lower tax brackets, such as a spouse or children, by paying them dividends or salaries. However, it’s important to note that there are rules in place (like the **Tax on Split Income** or TOSI rules) designed to limit income splitting in cases where the recipient doesn’t contribute significantly to the business.
Nevertheless, a well-planned income splitting strategy, within the rules, can help reduce the overall tax burden for the family.