Edmonton Accounting Firm | Incorporate Your Business Early
When mistake that many entrepreneurs make when they are starting out according to Edmonton accounting firm. Is assuming that they should not incorporate their business right away. That they should wait until they have grown to a certain size.
They often make this decision, because of the costs associated with incorporating their business. As well as the additional accounting fees they will pay. For their monthly reporting. And for the more complex corporate year end that their Edmonton accounting firm will have to provide for them.
However, they should also understand all of the benefits of incorporation. So that costs that they will incur. Can be justified. Because they will see how it is going to help them grow their business.
One of the first things that business owners should understand. Especially if they are contractors. Is that incorporating will actually help them get their WCB number. In fact, WCB often will refuse to give unincorporated businesses a WCB number.
This is a very detrimental to contractors, who often need to have this number in order to work on most job sites. While they think that the prime contractor is going to be able to cover them with their own WCB number. This is not usually the case.
Therefore, when business owners incorporate sooner. They will be able to get that WCB number that they need to take a wider variety of jobs. So that they can grow their business faster.
In addition to getting their WCB number in order to take more jobs. Being incorporated can also help business owners get hired on for more job sites.
The reason why, is because many companies simply refuse to hire sole proprietors. This is because Canada revenue agency may consider sole proprietors to be employees of the company.
And if a company gets this ruling from CRA. They will owe all of the payroll remittances that Canada revenue agency deems they owe.
This can equal several thousand dollars, and be very detrimental to companies. Because of this, many companies is simply make it a policy to hire only incorporated contractors. And completely eliminate this risk.
So by incorporating business owners can accept a wider variety of jobs, and get hired on more job sites. This is going to enable them to grow their business faster, and give them more opportunities to grow their business as well.
In addition to being able to get hired on more job sites. It is also going to allow business owners to protect their personal assets. Edmonton accounting firm says that if business owners get sued while conducting their business. It is the business owners themselves that are at risk when they are a proprietor.
However, once they incorporate. The corporation holds that liability. It is the company that gets sued, instead of the business owner themselves. This shelters them from most damages that can occur when a business gets sued.
If business owners have assets like home, or investments or financial savings. They should consider incorporating. So that they can protect themselves, and their family.
With all of these benefits of incorporating. Business owners should incorporate sooner rather than later. To help them grow their business as quickly as they can.
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While many business owners understand what incorporation is says Edmonton accounting firm. They do not necessarily understand all of the benefits. And because of that, but off incorporating their business early on.
However, by understanding all of the benefits that incorporation can offer them. Can help business owners make the decision that is right for them. Which can actually help them grow their business.
For example, when business owners are proprietors. The income that they earn in their business. Is taxed at the personal tax rate that they are currently paying.
And depending on what tax bracket they are in, they can end up paying up to 48% in taxes on their business income. Because that is what the highest personal tax rate in Alberta is currently sitting at.
However, the tax rate for corporations is only 11%. Meaning business owners can save a significant amount of money in taxes if they simply incorporate.
In fact, when discussing this with their Edmonton accounting firm. Business owners will find out that the amount that they will save in taxes.
Will outweigh the amount that they have to pay in additional accounting fees and incorporation fees. Once they started making fifty thousand dollars in net income year.
Therefore, business owners who want to avoid paying additional taxes. Should incorporate before they earn fifty thousand dollars in net income in a single year.
However, this is not where the benefits of incorporation in. There are many other benefits that business owners can enjoy once they incorporate.
This includes protecting their tradename. The name that they are pouring all of their time and energy into building a business around.
Many business owners make the assumption that by registering their tradename at a registries office will legally protect the name. But this is not true. Registering their name simply gives that a placeholder.
This will not stop another business or person from taking their tradename, and incorporating it themselves. When they do this, they will then owned legal rights to the name. and not the business owner who has been building that name for years.
In addition to protecting their name and paying fewer taxes. Incorporating can make them far more likely to qualify for loans from financial institutions and banks.
This is significant, especially if a business owner ever needs to secure financing to get an asset that will help them grow their business. Or buy a building that will help them increase their capacity.
While it is not of the rule that banks will not issue business loans to sole proprietors. However, Edmonton accounting firm says it is something that they have never seen before.
So to increase their chances of qualifying for loans and financing. Business owners should incorporate well in advance of needing those loans.
With all of the benefits of incorporation. Business owners should do this sooner rather than later in their business. So that they can save taxes, protect their name, and be more likely to qualify for the loans they need to grow their business.