Edmonton Accounting Firm | Benefits of Incorporating
There is no rule specifying when a proprietor should incorporate their business according to Edmonton accounting firm. And proprietors can operate that way for as many years as they want. However, they should make that decision only after considering all of the things that incorporating can do for them.
Many proprietors may not realize that there are benefits of incorporating their business. They often see that as something that is going to end up costing them in money. Because they know that there is a fee to incorporating.
And also, they will have to do some monthly reporting that is mandatory. And that will cost money. As well as their corporate year-end will cost more than the year end of their proprietorship.
However, looking at it from a cost of maintaining the corporation. It is very one-sided. And they may not be considering all of the financial benefits of incorporating.
One of the most important things that business owners should consider, is that as a proprietor, they will be paying a personal tax rate on their proprietorship income.
And while that might not sound like a very significant reason to incorporate. They should consider that the highest personal tax rate in Alberta is currently 48%. However, the tax rate for businesses that are incorporated is only 11%.
Simply by incorporating, proprietors can save up to 37% in taxes. And according to Edmonton accounting firm. If they have over fifty thousand dollars in net income each year.
It is cheaper to incorporate their business. Because of the tax they save. Even with all of the additional fees that they have to pay as unincorporated business.
Therefore, if proprietors are making over fifty thousand dollars in net income each year. Or if they are close to making that amount of money. Or if they are planning on making that amount of money or more.
They should consider incorporating sooner rather than later. So that they do not end up paying more in taxes inadvertently. Because they have not incorporated in time.
So from a financial only standpoint, incorporating a business can make a lot of sense. However it is not the only reason why a should incorporate their business.
Since the risk of running any kind of business is never zero. Any business owner who operates a business should consider the benefits of incorporating. This gives entrepreneurs limited liability.
What that means is if an entrepreneur gets sued while operating their business. If they are incorporated, then it it is more difficult for the directors of the company to have their personal assets affected.
Therefore, if a business owner wants to help protect their assets such as they are home, their vehicles and their savings. They should incorporate their business. So that if they do get sued. It is the company and the company’s assets that get sued. Instead of the business owner themselves.
With all of the benefits of incorporating. Entrepreneurs should set up a meeting with their Edmonton accounting firm. To discuss if they are better off incorporating their business. And then getting help with ensuring they can get it done in a timely fashion.
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Many entrepreneurs that start a business part-time, or in addition to their main job says Edmonton accounting firm. May not even think about what incorporation can do for them. And especially as their business grows, may not realize that there are many benefits to incorporation.
However, if any business owner is running a business of any size. They can benefit significantly by incorporating their business. For example, incorporating can help protect a business is tradename.
And while many entrepreneurs make the assumption that going to corporate registries, and registering their tradename can protect it. It does not actually legally protect their name. And another company can incorporate under that name legally.
Therefore, if a business owner is operating a business at any size. And want to ensure that nobody else can use that name. They can incorporate their business, and legally protected for the future according to Edmonton accounting firm.
Another benefit of incorporating a business. Is that entrepreneurs will be able to get a WCB number. That is often a requirement of walking onto a jobsite is an independent contractor.
In fact, WCB often looks at proprietors as a subcontractor. Requiring the prime contractor to hold the WCB number. When that is not always possible for the prime contractor to let their double seed be number extend to the subcontractor.
This can make it impossible for business owners who are proprietors to be able to go onto certain job sites. Because they do not have a WCB number. However, once proprietors incorporate. WCB never questions if they are anything but the primary contractor.
Making it possible for business owners who have incorporated to walk onto any jobsite and work. Because they have their WCB number in place.
In addition to being able to go onto any jobsite because they have a WCB number. Some companies will actually refuse to hire contractors who are operating a proprietorship. Because of the risks associated with those proprietors being deemed employees of the company.
In fact, the companies that are hiring the independent contractors carry all of the risk. And if Canada revenue agency considers the independent contractors are more like employees of the business.
That employer must pay the government all payroll remittances that would have been do to them. If that proprietor was an employee. Since this can equal several thousand dollars. Especially depending on how long the contractor has worked with that company.
And so to protect themselves. Many companies simply refuse to hire proprietors. Therefore, when a proprietor incorporates. They can get hired on it any company, without that company holding a risk of considering them to be employees of their business.
By incorporating, business owners can accept far more jobs than they could as a proprietor. Which will allow them to make more money, and grow their business even larger.
By understanding all of the benefits of incorporating. Can help business owners start the conversation when meeting with their Edmonton accounting firm.
To discuss how and when they should starts the incorporation process. So that they can take as many jobs as they are qualified for. So that they can grow their business without impediments.