How Ontario med spas should structure MD and RN partnerships the right way

If you own a medical aesthetics clinic in Ontario and you are not a physician, you have already run into the most awkward part of the business. You need a medical director. You cannot employ one. And the way most clinics paper over that gap is the same way they end up with a structure that fails under scrutiny.

Why two corporations

Ontario's Regulated Health Professions Act and the professional corporation rules under the Business Corporations Act mean a non-physician cannot own a medical practice or employ a physician to practise medicine. Voting shares in a medicine professional corporation have to be held by members of the College of Physicians and Surgeons of Ontario. Family members can hold non-voting shares in limited circumstances, but a nurse business partner cannot simply buy in.

So an RN-owned or entrepreneur-owned clinic ends up with two entities:

1. The medical professional corporation (MPC), held by the physician
2. The operating or management company, the spa corporation, held by the RN, NP or other owner

They are connected by a management services agreement. That agreement is where the structure either holds together or quietly falls apart.

What each entity can and cannot do

The MPC provides medical oversight, prescribing, delegation and supervision of controlled acts, medical assessment, and treatment of actual medical conditions such as migraine or rosacea. It bills for those medical services, which are generally HST exempt.

The MPC does not operate the spa, does not employ the aestheticians, does not hold shares in the spa corporation, and does not share in cosmetic revenue.

The spa corporation runs the business. It holds the lease and the equipment, employs the reception, aesthetic and technical staff, delivers cosmetic treatments, sells retail, collects all cosmetic revenue, and pays the MPC a fee for oversight.

The spa corporation does not diagnose, does not bill for medical services, and does not employ a physician to practise medicine.

The five ways this goes wrong

Paying the medical director a percentage of sales. This is the big one. Fee splitting between a physician and a non-member is prohibited under Ontario's medicine regulations. "The MD gets 10% of injector revenue" or "$40 per cosmetic patient" is the kind of arrangement that puts the physician's licence at risk and hands the CRA a reason to look at the whole structure. A flat monthly retainer, an hourly consulting rate, or a per-treatment oversight fee tied to genuine medical work are the compliant alternatives.

Running cosmetic revenue through the medical corporation. If cosmetic money lands in the MPC and the physician then pays the spa corporation, the flow is backwards. That exposes you to reclassification of income, HST filings that no longer reconcile, and a College problem on top of a tax one. Cosmetic revenue belongs to the spa corporation. Medical revenue belongs to the MPC.

A management services agreement that says nothing useful. Most of the agreements we review are short, generic, and silent on the things that matter. A workable MSA sets out what the spa corporation provides, which is space, staff, scheduling, equipment, consumables, marketing and business administration. It sets out what the MPC provides, which is oversight, chart review, medical assessment, prescriptive authority and compliance documentation. And it states how the physician is paid, at a fixed rate, as an independent contractor, with no interest in cosmetic revenue. If the fee has no basis you can explain, it is the first deduction to be challenged.

A POS system that does not know the difference. None of the common booking and payment platforms separate medical from cosmetic revenue by default. When service codes are not mapped, cosmetic treatments get flagged exempt, packages get split wrong, and gift cards are recorded as revenue on sale. During a review the CRA reconciles the POS against bank deposits, invoices, medical director payments and the clinic software. If those five things disagree, the reassessment writes itself. We go through this in more detail in our piece on HST for Ontario med spas.

Treating chart signing as oversight. A physician who never meets the patient, never reviews history and never documents a treatment plan has not created an exempt medical service by signing the chart afterwards. Where the record does not support the medical classification, the treatment is cosmetic and taxable at 13%, and it is taxable for the years already filed.

Paying injectors

The other classification question is on your own side of the wall. An RN or NP is only a contractor if they genuinely operate as an independent business: their own invoicing, their own insurance, control over their own schedule and clients, and real financial risk. Most injectors described as contractors in this industry would be found to be employees, which means unremitted CPP, EI and income tax with penalties and interest on top. The subcontractor or employee check walks through the same factors the CRA applies.

The structure that works

• Medical revenue and medical decisions sit in the MPC
• Cosmetic revenue, staff, premises and retail sit in the spa corporation
• The spa corporation pays the MPC a fixed fee, invoiced monthly, matching the MSA
• The spa corporation charges HST on cosmetic services and claims its input tax credits
• Each corporation files its own return and keeps its own records
• Charts, oversight logs, credentials and scheduling records support the split you have filed

Getting this arrangement right is largely a documentation exercise done once, then maintained. The clinics that struggle are the ones reconstructing it three years later from bank statements. If you want your current setup reviewed against how it would be read on audit, that work sits within our med spa practice.

All of our med spas and cosmetic clinics work

General information only, current at August 2026. Tax rules change and GST/HST status is fact-specific. Confirm your own position before relying on anything here.