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When people are setting up their new small business for the first time, Edmonton accounting firm says they often have many questions that need answers. This will help them understand how they should structure their business. And what decisions they should make early on. To help them not only save money. But avoid paying more taxes than they should.
One of the first questions that entrepreneurs have, is what is another term for unincorporated business, and how do they file taxes? Unincorporated businesses are also called proprietors. And proprietors must file their business taxes along with their personal taxes.
And while the personal tax deadline is typically April 30. Proprietors get an additional forty-five days. To help them with their additional filing requirements. Making June 15 the filing deadline for proprietors.
The next question that entrepreneurs often have for their Edmonton accounting firm they are starting out. Is what is the main advantage of having an unincorporated business, or proprietorship?
While there are not many advantages of having an unincorporated business. One of the only advantages, is that it is a lot simpler to do the financial year end. Which will allow them to pay less in accounting fees, making it cheaper.
As well, unincorporated businesses do not have to do monthly reporting. The way that incorporated businesses do. However, that comes with the trade-off of paying more in taxes as a proprietor.
Another question that people have as they are starting a business for the first time. Is what is the most surprising aspect of being a sole proprietor? One thing that many proprietors do not realize, is that the additional taxes that they have to pay.
This is not just having to pay the personal tax rate on their business income. But proprietors also have to pay Canadian pension plan, or CPP for short. In both the employer contributions, but also the employee contribution as well.
Proprietors often do not find this out until the end of the year, and they are hit with an additional tax, often more than five thousand dollars. And especially for new businesses. And for small businesses, five thousand additional dollars of tax. Can be a significant amount.
And the last question that many business owners have when they are building their business for the first time. Is how much money they have to make in their business. Or. In order to have the financial benefits of incorporating outweigh the costs?
In order to find the exact answer for their specific business, entrepreneurs should meet with their Edmonton accounting firm. However, the general rule is that once entrepreneurs make fifty thousand dollars in net income a year.
It is less expensive to incorporate, and pay the additional accounting fees. Then it is to continue operating as a proprietor, and paying the additional personal taxes on their business income.
Once entrepreneurs can understand the benefits of incorporation more clearly. They will be able to make the decision that is going to be most beneficial for themselves and their business. Which will help them save taxes, and grow their business.
There are many things that business owners have to learn quickly as they grow their business according to Edmonton accounting firm. And the sooner they learn what they need to know. The sooner they can make better business decisions.
When starting a business for the first time, many people have questions That will help them learn these things quickly. The first question they have is how does incorporating protect their personal assets?
This is an extremely important one. Because as a proprietor, the business owners themselves hold all of the liability in their business. However, once an entrepreneur incorporates.
The corporation holds that liability, and if the business gets sued. This incorporation makes it extremely difficult to get at the personal assets of the directors.
As a sole proprietor, if they get sued it is their personal assets on the line. Such as their financial savings, investment portfolio, and even their family home. To protect themselves as well as their family. Business owners who have significant assets. Should definitely incorporate.
Another question that people have for their Edmonton accounting firm in their starting out. Does registering a tradename offer the same protection as incorporating?
This is another question that many business owners assume the answer to. But no, registering their tradename does not offer the same protection as incorporating. In fact, registering the name simply gives it a placeholder.
But this does not protect the name legally, allowing another person or business to incorporate under that name legally. Giving them the legal rights to that name.
Therefore, if entrepreneurs want to protect the name that they are growing. They should incorporate sooner rather than later.
Another question that business owners often have, is will banks issue bank loans to unincorporated businesses? This is a really important one because 52% of all small businesses in Canada required a loan to get started.
And without incorporating, not only will they be less likely to get the loans they need to start their business. But if they ever need owns or financing from a bank or financial institution later on in their business.
Such as purchasing assets to help them grow their business. Or purchasing a building to allow them to pay less rent, and increase their output. If an entrepreneur has not incorporated, even if they run a successful business for many years. They are most likely to not get there loan approved.
And last question that people have for their Edmonton accounting firm when they are discussing starting their business. Is will incorporating help get a WCB number?
This is incredibly important for entrepreneurs that are going to be operating as contractors. Because WCB typically will not issue a number to unincorporated businesses.
A WCB number is required for most people to work on any jobsite. Therefore, if business owners do not incorporate, they may be significantly limiting themselves to the number of jobs that they can accept.
Being able to accept a wide variety of jobs is going to help a business owner grow. Which is why it is important that they incorporate sooner, so that they can grow quicker.
With all of the benefits of incorporating. Once people understand those, they will be able to make a decision that is going to help them in their business.
However the first step is sitting down their Edmonton accounting firm. And finding out all of the information they need to know to start their business.
