Edmonton Accounting Firm | Helping Entrepreneurs Succeed by Incorporating
Business owners may not realize how important the structure of their business is to their success according to Edmonton accounting firm. However, it is extremely important. Because not only can help business owners save money in taxes. But it can also help them in a wide variety of other ways.
One of the most significant things that incorporating a business can do, is limit the business owner’s liability. Since running a business has inherent risks. And even in an extremely low risk business. That risk level is never zero.
Therefore, by incorporating their business. They shift liability from themselves, their assets and finances. And move it to the company. So that if an entrepreneur ever gets sued. The corporation will hold that liability instead of them.
This can be extremely beneficial. If an entrepreneur owns assets like a family home, or investments. That allow them to earn another stream of income.
While this can cost the business money, or even cost them assets. Edmonton accounting firm says it is not going to cost them their home or their personal money. Which can be a significant benefit to a corporation.
Another significant benefit of incorporating. Is that it protects businesses tradename legally. Many entrepreneurs assume that their tradename is legally protected. Since they registered it at corporate registries.
However, that only is a placeholder. And does not prevent other companies or people from taking that tradename and incorporating their own business under it.
Therefore by incorporating their business. They protect their tradename. Which will help them have the legal rights to the name that they have spent so much time building.
The next thing that business owners should understand about incorporating their business. Is that it is going to allow them to be hired on more job sites. Edmonton accounting firm says this is because many business owners will need to have WCB coverage in order to work under a prime contractor.
However, as a proprietor, WCB might not give them the number they need to work on a job site. once a business owner incorporates however. WCB considers that business to be the prime contractor.
Allowing entrepreneurs onto jobsites, and the freedom to work without worrying about whether they can work under symbiosis WCB number or not.
In addition to that, some companies will refuse to hire proprietors. Because of the risk that Canada agency might deem them as employees instead of contractors.
If Canada revenue agency considers the contractors that some companies have hired. Should be considered employees instead of contractors. That company may have to pay back all of the payroll remittances that they did not initially pay.
And depending on the length of time that the independent contractor has worked for the company. And how many companies that they have hired that were proprietors.
Companies might have to end up paying several thousands of dollars in payroll remittances. So to avoid that risk. They simply say that they will not hire independent contractors. Unless they are incorporated.
By incorporating, business owners can land more jobs than they would if they were sold proprietor. And that in addition to protecting their assets, and their tradename. Can be enough of a reason to incorporate their business.
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Many entrepreneurs might not realize all of the tax benefits associated with incorporating their business according to Edmonton accounting firm. And while they might see corporation as an expense. Once they realize what the benefits are. They may be okay with incurring that expense. With how helpful it is.
Since proprietors will be filing their business taxes alongside their personal taxes. They will get taxed a personal tax rate for their business income. Even though this might not seem like a big deal. And can equal a lot of money.
For example, the highest personal tax rate in Alberta is currently 48%. While the tax rate for incorporated businesses is only 11%.
And while a 37% savings in tax seem very attractive. Edmonton accounting firm says some business owners think that they would have to making hundreds of thousands of dollars each year in order to generate those kinds of savings.
However this is not true. The business owner only has to be making fifty thousand dollars in net income each year. Before paying themselves. In order to have such a benefit of incorporating. That by remaining a proprietor, they will incur more costs and while costs of incorporation.
Costs of incorporating include actually incorporating their business, there corporate year-end tax return, and their monthly reporting. And while this can add up says Edmonton accounting firm. The amount of taxes that they can save adds up even more.
What is even more significant, is that if entrepreneurs want to ever qualify for loans. Whether it is because they need financing to purchase assets take equipment or machinery to help them grow their business. Or if they need to buy a building. In order to conduct more business.
Financial institutions and banks will not loan to unincorporated businesses. So that entrepreneurs that incorporate sooner rather than later. Will be able to apply for financing whenever they want. So that they can get the financing they need to to grow their business without stalling the growth of that business.
Business owners may even have to end up paying more in taxes than they realize as a proprietor. For example, they may not realize that they have to pay both the employer and the employee portion of CPP. They may only make that realization at the end of the year.
They might get hit with an additional fifty-two hundred dollar bill that they do not expect. That could have been avoided by incorporating their business.
The sooner entrepreneurs understand what not only the costs of incorporation is. But what the benefits are as well. Will allow them to discuss it with their Edmonton accounting firm. And make the decision that is right for both the business, and the entrepreneur.