This Legal section contains resources, tools and templates to help you manage legal processes that will likely impact your chiropractic practice.

[Note: The content in this section was updated from our previous website to reflect the new site’s voice and editorial standards. It is now in subject matter expert review and will be revised, as required, in the near future.]

Contracts and Agreements

Your patients might be top of mind, but they aren’t the only people you’ll need to think about when setting up your chiropractic practice. You’ll also deal with other chiropractors, health care professionals and support staff. The people you work with will likely change over the years as well.

Business arrangements with these employees, colleagues and contractors involve a variety of agreements.

These agreements include:

  • Employment contracts
  • Partnership agreements
  • Contractor agreements
  • Space sharing agreements
  • Associate Agreements

We’ve compiled a range of resources and templates to help you develop legal documents related to working as a chiropractor or hiring one.

Contracts and Agreements for Associates and Employees

Associate Agreements

At some point in your career you’ll either be hired as an associate in an existing practice or you’ll be doing the hiring for an associate in a practice you own. Either way, it’s vital to negotiate an Associate Agreement.

An Associate Agreement is a contract between the primary owner of a practice and another professional who will be working there. An associate provides services on behalf of a clinic, but may not necessarily be an employee of the practice. This type of written agreement protects both parties. We developed this Associate Agreement Outline to provide you with a general overview of what an associate agreement entails and why it’s so important. Its companion document — our Associate Agreement Checklist — is a useful tool for negotiating your next Associate Agreement.

Non-Competition Agreements

Most likely you’ll deal with a non-competition agreement at some point in your career, whether you’re the owner of a practice or an associate there.

If you’re a principal practitioner intending to hire an associate’s services, it’s imperative for the associate to sign a non-competition agreement — or at least an associate agreement with non-competition and non-solicitation clauses in it. If you don’t obtain a written agreement about this, it can be difficult and expensive to stop the associate from soliciting your patients later.

In addition, potential purchasers may be reluctant to purchase your practice, if  existing associates at the practice are not subject to non-competition and non-solicitation restrictions. This Non-Competition Agreements outline provides additional information.

Confidentiality

It’s also important for you to ask both your associates and employees to sign a confidentiality agreement. You can use this Confidentiality and Proprietary Information Agreement template to help you prepare one.

Hiring and Termination Documents

Whether you’re doing the hiring or letting go, you usually need a letter to hire or terminate an associate or employee. This Employment Offer Letter Template and Termination Agreement Template are examples of what to keep in mind for these kinds of agreements.

Partnership

When you decide to become a business owner you might chose to go it alone as a sole proprietor or you might consider forming a partnership with others. A partnership is created automatically when two or more people carry on a practice in common with a view to a profit.

Going into partnership has many advantages. The idea can be exciting, but it’s not without potential pitfalls. If you want to have the best opportunity of creating a successful partnership, you need to prepare a partnership agreement in consultation with a lawyer. This Partnership Agreement Outline is a good starting point.

Note: This content is for general understanding only. Consult a lawyer regarding your specific matter.

Related OCA Webinar:

  • Preparing Contracts (Mills & Mills LLP)

Employer Responsibilities

Hiring an Independent Contractor

When you hire people to work in your practice, you become an employer with certain responsibilities and obligations.  Some of these responsibilities differ depending on whether you hire an employee or have an agreement with an independent contractor.

For the most part, your responsibilities with an independent contractor are less onerous than those with an employee. Independent contractors do not require tax deductions and they aren’t eligible for most benefits under the Employment Standards Act such as:

  • Paid overtime
  • Pregnancy and parental leave
  • Vacation pay
  • Minimum termination and severance pay

Independent contractors invoice you for the service(s) they provide. By law, they must charge HST on all invoices and include their HST number.

Hiring an Employee

There are certain legislated responsibilities you must follow — whether you have one person or 10 people working for you.

These responsibilities include:

As an employer you have responsibilities under the Occupational Health and Safety Act including:

These responsibilities apply to independent contractors, as well as employees.

Personal Responsibilities

Legal obligations and the employment arrangements you choose aren’t the only things to consider when it comes to being an employer. You’re also responsible for providing a clean, safe and professional work environment, where people are treated with dignity, respect, independence and equal opportunity.

Be the kind of boss you’d want for yourself.

Note: This content is for general understanding only. Consult a lawyer regarding your specific matter.

Related Resources:

Structuring a Practice

Deciding how to structure your business is one of the many decisions you’ll need to make about your practice.

There are three basic types of business structures that may work for you:

  • Sole proprietorship
  • Partnership
  • Corporation

Sole proprietorships are typically best suited for new chiropractors who want to work as independent contractors or associates at established clinics.

Partnerships are when two or more people reach an agreement to work together and share in the profits/loss of their mutual business. This business structure is best when you form a partnership, but do not wish to incorporate the practice.

Corporations are the most common type of business structure that chiropractic offices tend to use. This type of business structure is common when two or more chiropractors form a business and wish to limit their personal liability risks. It’s also even more attractive for business owners who may be earning more income than they need for their day-to-day expenses. A corporation is more attractive because it enables you to defer tax on any income not withdrawn from the corporation during the year.

Business & Accounting 101 for New Chiropractors (PDF) provides a more in-depth summary of these options. We’ve created an overview for the steps involved in ‘Buying a Practice.’

Note: This content is for general understanding only. Consult a lawyer regarding your specific matter.

The following OCA legal Advantage Partners are available for consultation:

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Before You Incorporate Your Practice

One of the many business decisions you’ll need to make as you establish and grow your practice is whether or not to incorporate. This question is often top of mind when tax season approaches. This is when many of you will be wondering if incorporation is a viable and appropriate strategy for your businesses.

Is Incorporation Right for Your Practice?

In a 2013 survey (Leger Marketing), 59 per cent of OCA members described themselves as sole owners or partners in a practice. Another 24 per cent were associates and contract employees of a clinic.

The team at SRJ Chartered Professional Accountants helped us prepare this resource for those of you wondering what’s right for your practice. 

They suggest the decision whether or not to incorporate includes the following factors:

  • Management of legal liability
  • Taxation implications
  • Record keeping and compliance obligations

Management of Legal Liability

Principals in unincorporated business structures, such as sole proprietorships and partnerships, do not enjoy the same liability protection as those in corporations. In a sole proprietorship, for example, the individual who owns and operates the enterprise is personally liable for the operations of the business, including its debts. The reason for this is because the business is not a separate legal entity from the individual or individuals operating it. 

A corporation is a separate legal entity and entitled to “limited liability.” Keep in mind that the “limited liability” benefits of incorporation do not apply in all instances. It’s important to speak with your accountant or lawyer to gain further clarification.

Taxation

Incorporation provides significant tax benefits. In Ontario, the tax rate on the first 500 thousand dollars of taxable corporate income can be as low as 15.5 per cent if the corporation is classified as a Canadian Controlled Private Corporation (CCPC). There are specific requirements of a CCPC and it’s important to consult with your accountant to ensure you meet the requirements.

There are also capital gains benefits if you’re selling a practice that’s organized as a corporation. These benefits must be balanced against the costs associated with starting up and operating a corporation. 

With a corporation, you must annually file an additional set of tax returns on behalf of the corporation, as well as your own personal tax returns for example. Corporate returns are more costly to prepare because they’re generally required to include a complete set of financial statements. This is also the case with partnerships.

There are also capital gains considerations. The capital gains deduction available when selling qualified small business corporation shares is often referred to as the lifetime capital gain exemption. As of 2017, each Canadian who wishes to utilize this benefit can be shielded for up to $835,716 in lifetime capital gains. 

There are specific criteria that need to be tested for the lifetime capital gain exemption. Speak to your accountant or lawyer to determine if you qualify for this exemption.

It’s a myth that only incorporated businesses can deduct expenses from their revenues when reporting their income to the Canada Revenue Agency (CRA). Even in a sole proprietorship, where the personal tax returns of the proprietor serve as a business return, business operating expenses can be claimed for tax purposes. Many sole proprietors find this system efficient and less costly to maintain. 

However, personal income tax rates, can result in greater tax liability for sole proprietors. In addition, tax planning is more challenging for sole proprietors than for incorporated practitioners. Incorporation gives individuals more options for tax planning and tax savings.

Record Keeping and Compliance

In addition to preparing financial statements at tax time, corporations have record-keeping obligations. For instance, you must maintain separate bank accounts for the corporation and the corporation must also keep an updated minute book. 

Compliance standards for various regulatory and human resources requirements are generally higher for corporations.

The College of Chiropractors of Ontario (CCO) also has specific requirements for the provision of chiropractic services from a corporation. For instance, all shares of the corporation must be held by one or more CCO members and all directors and officers of the corporation must also be shareholders.

Points for consideration and discussion:

  • Make sure you are earning money consistently and have used up all of your losses before you even consider incorporation.
  • The tax system is fair in that it attempts to tax all income equally, regardless of the form the income takes, e.g. dividends or salary.
  • Tax avoidance (not evasion) is not possible by incorporation. Few, if any, loopholes are left. The only benefit is tax deferral, e.g. bonus.
  • Financial Planning (e.g. RRSPs) – You should be making the maximum possible RRSP contributions. So your practice should generate at least $75,000 in profits before considering incorporation. Also, incorporation tends to encourage payment of dividends that are not eligible for the RRSP deduction limit.
  • Estate planning is usually one of the big benefits of incorporation. This is not the case under professional corporation (PC) rules, as all shareholders must be members of the profession.
  • Benefit of capital gains exemption of up to $500,000 on the sale of shares in a PC (if it is a CCPC – Canadian Controlled Private Corporation).
  • Income splitting via directors’ fees is not possible as directors/officers must be a shareholder.
  • There is no limited liability on the practice front. Liability will be limited for such things as agreements signed in the PC’s name, e.g. leases (as long as a personal guarantee is not given).
  • If you do incorporate, there is the added burden (one time) of converting all agreements of the business into the name of the business. Failure to separate business and personal activities may result in your incorporation being deemed a sham and result in taxation at personal rates.
  • Activities of a PC are limited to the practice of the profession. Long-term investment is not permitted in a PC. However, a holding company can make this possible.
  • Incorporation may result in a lower price for a practice, if shares rather than assets are sold. Assets are depreciable (they can be written-off over time), whereas shares are not depreciable. The purchaser’s liability is also better defined if they buy assets.
  • It is unclear as to whether surpluses will be allowed to be carried in a PC.
  • Additional costs: Incorporation $1,000. The extra tax return per year costs $250-$500.

About This Article

The OCA thanks SRJ Chartered Professional Accountants for its assistance in preparing this article, which first appeared in the Winter 2014 issue of ON Chiropractic.

Content is for general understanding only. 

Please seek legal advice regarding your specific matter.

The following OCA legal Affinity (Advantage) Partners are available for consultation:

millsandmills logo       gardiner-roberts_250

Legal Advice

“Over the years, the legal issues faced by chiropractors have evolved and multiplied. Chiropractors must decide where they want to practice and with whom. A business structure must be determined, leases need to be negotiated, associate agreements might need to be signed and the risk of personal liability should be analyzed and exposure to it minimized. This is on top of the need to observe the regulatory requirements set out by the College of Chiropractors of Ontario.” – Mills & Mills

Here are some useful articles to help you understand the legal process:

Why you need a lawyer

It’s strongly recommended that you do not sign an agreement dealing with a significant matter in your practice until you’ve had a lawyer review it and explain the legal implications to you. The importance of this recommendation cannot be overstated. 

Often, agreements that are presented to you by an individual or company are one-sided. For example, frequently a landlord will give you their “standard” lease agreement. These agreements most likely do not take your best interests into account. You should retain a lawyer  to explain the terms of the agreement to you before you sign it. 

You do not have to accept the terms in a landlord’s “standard” lease agreement. In fact, there’s no such thing as a “standard” agreement and every agreement should be tailored to meet the specific needs of your business and situation.

You should hire a lawyer to:

  • Analyze agreements or documents and explain their implications (i.e. your obligations and rights) to you, before you sign.
  • Explain to you what terms are missing in an agreement or document you’re asked to sign and recommend changes to make the terms more favourable to you.
  • Negotiate with other people, such as a landlord or a seller of a practice, to make important changes to the terms of agreements (e.g., an offer to lease).
  • Write the terms of any legal contracts for your practice, such as an employment agreement or non-competition agreement, for your staff members and associates.
  • Write the purchase and sale agreement (and related documents). Perform legal due diligence searches against the vendor (seller) of a practice, if you’re planning to purchase one from an established practitioner.

To protect yourself, make sure every promise the other party makes to you is put in the written agreement.

A business lawyer can assist you with your practice’s legal needs about the following:

Business start-up –

  • Registration of a business name for your practice
  • Lease of office space
  • Start-up of your practice
  • Equipment purchases/leases
  • Supplier contracts
  • Purchase of an existing practice
  • Transfer of patient records
  • Requirements under the legislation and regulations governing your particular profession

HR Agreements –

  • Associate agreements
  • Partnership agreements
  • Cost-sharing agreements
  • Employment matters
  • Non-competition agreements
  • Non-solicitation agreements

Financial and Security Needs – 

  • Financing documents, such as loan agreements
  • General security agreements and also guarantees

You may believe it’s too expensive to hire a lawyer. However, chiropractors and other health care professionals have often found it’s much cheaper to deal with and prevent a serious legal problem before it starts than to attempt to resolve it after it’s occurred.

Too often people sign agreements without fully understanding their obligations and rights under it. If problems subsequently develop, they erroneously believe a lawyer will magically be able to get them out of a difficult situation.

Selecting a practice lawyer

It’s important to find a lawyer who has experience dealing with the kind of legal issues you’ll face in your practice and who generally understands the nature of our industry.

Find a lawyer who:

  • Has experience dealing specifically with business law, or what’s often referred to as ‘corporate/commercial law,’ rather than one who has a general practice.
  • Will explain the law and the options available to you and allow you to decide which option to pursue

You should make a business decision by considering the legal issues, as well as the business issues, including the expense and time involved. For instance, the law may be on your side in a particular situation, but it may not be in your best interest to sue someone to enforce your legal rights, if the cost involved will detrimentally affect your business.

Your primary goal is to find a business lawyer who you have confidence in and who you can speak with openly.

Here are several ways that you can find the right lawyer for you:

  • Speak to your classmates, colleagues or friends to get a reference about their lawyer.
  • Read the advertisements in your professional magazines to see if any lawyers are advertising.
  • Attend annual professional conventions and speak with any lawyers who are presenting or exhibiting their services at the convention.
  • Speak with your accountant or your banker because they may have a lawyer they’ve had experience dealing with and are comfortable with.
  • Call the Lawyer Referral Service offered by the Law Society of Upper Canada and ask for names of business lawyers.
  • Search the internet for a lawyer in your area. Often a lawyer will have articles of interest on their website giving you preliminary information about a topic.

Speak with a few lawyers, either in person or over the phone, prior to retaining one. Many lawyers are willing to offer an initial consultation (for free or for a small fee) so you can discuss the facts of your situation with them and see if you feel comfortable with each other.

Initial consultation

Bring all of your relevant documents to the initial consultation.

Prepare a list of all the specific questions you want to ask the lawyer.

Include the following questions:

  1. How much do you charge per hour?
  2. Can you give me an estimate of how much your services will cost?
  3. Do you require a retainer? (A retainer is an initial deposit that most lawyers request before beginning any work for a client.)
  4. How quickly can you deal with my matter?
  5. Is there anything that I can do to keep my cost down?
  6. Have you had experience dealing with the types of issues my situation involves?
  7. How will you keep in touch with me?
  8. What services does my estimated fee cover? (For example, will you do the negotiation(s) for me?)

Many people seriously underestimate the amount of work, cost and time required to complete a legal matter. 

If you’re not satisfied with the lawyer during your initial consultation, don’t feel obligated to retain them. Keep looking.

Don’t expect to get free legal advice at your initial consultation. Most lawyers are reluctant to provide legal advice unless they’ve been professionally retained and had an opportunity to assess the facts of your situation and review the relevant legislation.

The initial consultation will:

  • Enable the lawyer to obtain facts about your case and explain in general terms what assistance they can provide.
  • Give you the opportunity to explain your objectives in relation to the matter at hand.
  • Allow you and the lawyer to determine whether you each feel comfortable working with one another.
  • Provide the opportunity to determine if the lawyer takes a preventative approach to protect their clients’ legal interests
  • Identify the manner and degree to which the lawyer will keep you informed of the progress of your matter.
  • Determine if the lawyer is willing to let you conduct negotiations with your landlord, associate or the individual who is involved in your legal matter, to reduce your legal fees.

Consider the following criteria when select a lawyer:

  • Quality of their work or level of service
  • Do not look at the lowest fee estimate

The lawyer that gives you the lowest price may not be getting around to your matter for a couple of weeks. If you want a matter done on an urgent basis, a lawyer may charge you a higher fee. 

Too often people wait until the last minute to retain a lawyer and then seriously underestimate the amount of time one requires to complete a legal matter. Consult a lawyer as early as possible.

Lawyer fees

Lawyers have various ways of setting their fees depending on the type of legal service they provide. A lawyer may charge a fixed fee for specific tasks, such as preparing an associate agreement. 

However, a lawyer will often be unable to provide you with a fixed estimate because the amount of time required for a particular matter is unknown at the outset. Many factors can affect the cost of the legal services, such as complexity of the matter and the amount of negotiation required with another individual, such as the landlord.

Generally, most lawyers charge their clients an hourly rate. These rates vary from lawyer to lawyer.

These charges could include:

  • Discussing your legal matter with you
  • Responding to your telephone calls
  • Conducting research
  • Writing agreements and letters
  • Preparing documents and negotiating with lawyers who represent the landlords, associates, principal practitioners etc.

Your lawyer should keep you apprised of the amount of work they’ve done and advise you if any circumstances change. For instance, there may be changes to the initial estimate given to you.

Lawyer’s invoices consist of two components:

  • Legal fees
  • Disbursements

Legal fees:

  • Fees for providing professional services, such as providing legal advice, writing, analyzing and explaining documents

Disbursements:

  • Out-of-pocket expenses, such as government search fees, government filing fees, courier charges, long distance charges

Ask the lawyer up front about the estimate for both their legal fees and disbursements. Some lawyers will attempt to gain your business by discussing an estimate for the legal fees portion without adequately explaining whether disbursements are included.  In such cases, the service actually ends up costing you more than originally anticipated. This is why it’s important to get an estimate for both legal fees and disbursements up front.

Once you have retained a lawyer’s services, don’t expect the work to be completed right away. Sometimes your situation may involve complicated legal issues that you have not anticipated; protracted negotiations with a reluctant or un-cooperative third party; or extensive legal research if your matter involves areas of the law for which there are no immediate clear answers.

Note: This content is for general understanding only. Consult a lawyer regarding your specific matter.