Edmonton Accounting Firm | Incorporate to Help Grow Your Business
When small business owners start their own business for the first time, Edmonton accounting firm says they can choose which business structure they operate under. Whether that is a sole proprietorship, or a corporation.
And while many small business owners might assume that they need to wait until they are much larger in order to incorporate. This is not true. There is no limit on what size of company can incorporate.
However, many small business owners understand that not only is there a fee to incorporate their business. But there is also increased reporting requirements. And a more complex year end. That often results in higher fees from their Edmonton accounting firm.
Therefore, especially when they are small and trying to save money. They often opt to not incorporate. Especially when they do not understand all of the benefits of incorporating their business.
They should understand many of the benefits of incorporating. So that they can make the decision that is most beneficial to them and their business.
While there are many various benefits, one important benefit that small business owners. Especially if they are contractors should know about. Is incorporating will help them get a WCB number.
Since many contractors need to WCB number in order to work on most job sites in Alberta. By incorporating, they can guarantee that they will get a number. So that they can accept jobs on any variety of job sites. So that they do not have to turn down work.
Another reason why contractors should incorporate their business sooner rather than later. Is it because some companies refuse to hire contractors that are sole proprietors.
The reason why some companies will refuse to hire sole proprietors. Is because they run the risk of having Canada revenue agency considering those sole proprietors employees of the business. Instead of independent contractors.
And when companies who have hired sole proprietors have them considered employees by Canada revenue agency. They then have to submit all the payroll remittances that they should have submitted. If they were in fact employees.
This is a risk that rests solely on the shoulders of companies that are hiring contractors. And so to completely eliminate their risk. They simply say that they will not hire contractors unless they are incorporated.
Therefore, by incorporating their business early on. They can get hired on at a wider variety of businesses. And walk onto many more job sites than they would. If they were simply sole proprietors of their business.
Another benefit of incorporating their business. Is actually protecting their personal assets. As a sole proprietor, if they get sued while operating their business. It is the business owner personally that is at risk. If they have assets like home, or investments. These assets are also at risk if they get sued.
However, once they incorporate. The corporation holds that liability. Sheltering the business owner from most risks, including if they get sued while operating their business.
Therefore, when business owners start their small business. When they have their initial meeting with their Edmonton accounting firm. They should discuss the benefits of incorporating. So that they can make the decision on if it is best for them to incorporate immediately.
So that they can grow their business as quickly as they can. Because they do not have to refuse jobs because they are not incorporated.
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There are many different benefits of incorporation says Edmonton accounting firm. But many business owners still hesitate to incorporate their business. Because of the additional costs that are associated with it.
However, these same small business owners. May not realize all of the money that they can save by incorporating their business right away.
One of the first things that small business owners should learn. Is that as a sole proprietor. They are required to pay the employee and employer portion of CPP.
This additional tax that they may not be aware of. Can add up to over fifty-two hundred dollars in a single year. And many sole proprietors do not expect this.
Having to pay over five thousand dollars of taxes at the end of the year that they do not expect. Can be a huge hit to many small business owners.
And in addition to being able to save taxes that way. Business owners should also understand how much tax they can save with the tax rate once they incorporate.
For example, sole proprietors have their business income taxed at the personal tax rate. Which in Alberta can talk about at 48%.
The tax rate that they will get their business income taxed at. Depends on their tax bracket that they are in at the time.
However, businesses that are incorporated only have to pay 11% in tax rates. This means, business owners can potentially save up to 37% in taxes.
Even if many small business owners understand that they can enjoy a lower tax rate. They still think that the costs associated with incorporating. Means that they will end up spending more money in additional fees. Then they will save on taxes.
This is why Edmonton accounting firm let us their clients know. That all they have to be making in net income per year in order to save money by incorporating. Is it fifty thousand dollars each year, before they pay themselves.
Therefore, if any business owners are already at that threshold. Or are quickly approaching it. They should incorporate sooner rather than later. So that they do not end up paying more in taxes inadvertently. If they grow quickly, and pass that amount.
In fact, the recommendation by Edmonton accounting firm. Is to incorporate sooner rather than later. So that they do not end up paying more in taxes if they experience sudden growth.
With all of the benefits of incorporation. Business owners should get all of the facts. In order to make their decision. Because once they know how much they can save in taxes. And what they have to make each year in order to be benefiting from the incorporation.
They will be able to make the decision that is most beneficial for themselves, their business and ultimately their family.