Edmonton Accounting Firm | Should Proprietors Incorporate
There are many benefits of incorporating a business according to Edmonton accounting firm. However, many proprietors get stuck on thinking that incorporating is more expensive. And therefore resist incorporating for a long time.
And while it is true, doing the corporate year end for an incorporation costs more. Than doing the financial year end for a proprietor typically. However, the tax savings alone, often outweigh the costs associated with maintaining a corporation.
And in addition to the tax savings, there are many other benefits to incorporating a business. That proprietorships may not even realize.
If proprietors are wondering when the best time for them to incorporate would be. They should bring this up with their Edmonton accounting firm at their next appointment. To talk about all of the benefits that they can see in their business. If they decide to incorporate.
One of the first things that Edmonton accounting firm will let them know. Is that while the personal tax rate in Alberta tops out at 48%. The tax rate for incorporated businesses is only 11%.
This means, that proprietors can be paying up to 48% in taxes. Which can add up very quickly over the course of a year. In fact, if a proprietor is making fifty thousand dollars in net income each year.
They most likely are paying more in taxes. Then they would pay in incorporating, and then maintaining that incorporation. Through monthly accounting and financial year-end costs.
But in addition to saving taxes, proprietors can see many other benefits of incorporating their business. One of the first reasons why they should consider incorporating sooner rather than later. Is because it can help protect a proprietor’s personal assets.
A corporation offers limited liability. And if business owners end up getting sued while conducting their business. Once they incorporate, it is the company that get sued. And not the business owner themselves.
This means, is going to be more difficult for a person who is suing the company. To get the directors of the corporation. Which can help protect their assets such as their home, their vehicles and their savings.
Especially if a business owner has a family, and wants to help protect the home that they live in. One of the best things that a business owner can do is incorporate. And before a business owner inks that they will never get sued. They should realize that the risk of lawsuit is never zero.
The next benefit that entrepreneurs should consider when they own a proprietorship. Is that if they want to protect their tradename, they should incorporate. Many proprietors think that simply by registering their tradename at corporate registries can protect that name.
However, registering that name is only a placeholder. And will not protect another company from taking that same name and incorporating it. Therefore, to ensure that it is legally protected. Business owners should incorporate, so that nobody else can use their name.
While the financial benefits of incorporating a loan are monumental. Even if business owners have not reach that fifty thousand dollars threshold. They may want to incorporate their business. Because of all of the protection that they can get through that incorporation.
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One of the reasons why people operate proprietorships instead of incorporations according to Edmonton accounting firm. Is because they are only running their business part-time. But there are many reasons why business owners should incorporate. Even if their business is not their main income.
There are many benefits that business owners can get by incorporating. And especially if an entrepreneur has plans on growing their business. They should incorporate sooner rather than later. One of the first things that they will be able to do once they incorporate is get a WCB number in Alberta.
When businesses are bidding on jobs. Especially if they are independent contractors. They may not be able to get a WCB number. The reason why, is because WCB typically wants to issue coverage to the prime contractor.
Therefore, independent contractors may be working for another contractor. Or be hired by a company. And WCB will not issue the contractor a number.
This can make it very difficult to work on many job sites. Since many companies will not give an independent contractor their own WCB number. Making it impossible for independent contractors to work on certain job sites. Because they cannot get a WCB number for themselves.
However, once a business incorporates, WCB sees the company as the prime contractor itself. Making it easy to apply and get a WCB number. So that business owners have any difficulty getting hired on at any job sites due to do BC be concerns.
Another reason why business owners may want to incorporate sooner rather than later says Edmonton accounting firm. Is because another roadblock of being hired by a company to be an independent contractor. Is if they are not incorporated, Canada revenue agency may consider that proprietor to be the employee of the business.
And while this does not directly affect the proprietor. The company that hires them to do the independent contracting. Holds all of the risk associated with those proprietors being thought to be their employees instead.
If Canada revenue agency does deem the independent contractor to be an employee. Then the company has to pay the government all payroll remittances that they would have owed. Dating back to the very first day that they hired the independent contractor.
This can end up costing the company several thousand dollars. Especially if they have worked with that independent contractor for many years. And because of that, many companies simply will not hire any businesses that are not incorporated.
Once a business owner incorporates, Canada revenue agency will never consider that business or contractor to be an employee of the company that hires them. And completely eliminates the risk on behalf of the company that is doing the hiring.
Therefore, by incorporating their business. Edmonton accounting firm says business owners will be able to land more jobs than they ever would before. Making it an easy decision on whether they should incorporate their business sooner or later.