Edmonton Accounting Firm | Understanding the Benefits of Incorporating
While there are many different benefits of incorporating according to Edmonton accounting firm. From tax savings, to protecting business owners, and helping them land more jobs.
Many sole proprietors continue to look at the cost of incorporating as the major deterrent. On why they are not incorporating their business.
And while there is a cost associated with incorporating their business. Along with increased costs for doing their corporate year-end. As well as they hear monthly reporting.
Ultimately, the benefits that entrepreneurs will have from incorporating their business. Often overshadow the costs associated with corp rating their business.
One of the first things that business owners will be able to protect by incorporating is their tradename. While most business owners initially assume that registering their name at corporate registries. The legally protected that name.
Unfortunately this is not the case. And until an entrepreneur incorporates that tradename. Anyone else can come along and take that name and incorporate it first.
Therefore, if so proprietors want to protect the name that they have spent years creating. Instead of assuming that registering it will protected. They can simply incorporate, and know that it is legally protected.
Another way that business owners can tax themselves by incorporating. Is because once they incorporate. Edmonton accounting firm says their company holds the liability instead of them.
In case an entrepreneur ends up getting suitable conducting their business. If they are not incorporated, it is their own assets and finances that are at risk during the lawsuit.
And even if many entrepreneurs say that they very low risk businesses. Or if they are not operating their business on a full-time basis. No businesses are a zero risk business.
This is especially beneficial if an entrepreneur has things like home, or investments. They are going to want to ensure that they do not put that home, and their family at risk. Therefore, it can be worthwhile to incorporate.
While incorporating also is not going to guarantee that a business owner will not face ramifications of being sued personally. It does make it significantly more difficult. For anyone to affect the directors of their corporation personally. If their business is sued.
Another way that businesses can benefit from incorporating. Is by being able to get WCB number. Many sole proprietors may not even take into consideration. That WCB will not necessarily issue so proprietors WCB numbers.
And many these that hire them as a subcontractor will require them to have a WCB number. However, if they cannot get that number, it is going to limit the number of sites that they can work on. And can limit how much money they can make.
Therefore, by incorporating. Business owners will be able to accept a wider variety of jobs. That can help them grow their business.
The benefits of incorporating do not just include protecting their personal assets and finances. But protecting their name. And allowing business owners to take a wider variety of business and more jobs.
That is why so proprietors should talk to their Edmonton accounting firm about incorporating sooner rather than later.
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Because there is a cost associated with incorporating business says Edmonton accounting firm. Many sole proprietors think that it is a financially prudent decision to avoid incorporating. And first try to grow their business as large as possible.
This is not a wise business decision for many reasons. Including the tax savings that business owners can enjoy. If they incorporate their business sooner rather than later.
Many business owners might make the assumption that they are not going to benefit financially from incorporating. Unless they have brought their business to a point of making hundreds of thousands of dollars in profit each year.
And while the more money that a corporation makes, the more they save in taxes. The amount of money that a business owner has to make each year. Is quite small, in order to see those benefits.
The first thing that proprietors should keep in mind. His since they file their personal taxes along with their business taxes as a sole proprietor. They get taxed the personal rate of taxes for their business income.
While this might not seem like a big deal. Business owners should consider that the highest personal tax rate in Alberta is currently 48% according to Edmonton accounting firm. While the tax rate for businesses that are incorporated is only 11%.
Depending on what tax bracket a sole proprietor falls into, they may pay less than 48% in taxes. But regardless of what it is. It is going to be more than the 11% that they would get if they were incorporated.
And while many entrepreneurs think that even though they may end up saving 37% in taxes. They would need to make so much money each year in order to get that. That it is still not worth their while to incorporate.
However, the amount of money that business owners typically have to make in order to make incorporating be the better financial decision. Is only fifty thousand dollars a year in net income for paying themselves.
If entrepreneurs have made that minimum amount, or are close to making that amount. They should set up an appointment to meet with their Edmonton accounting firm as quickly as possible.
In order to talk about when the right time to incorporate would be. So that they do not end up paying more in taxes. Then they would pay in incorporating fees.
However, in addition to saving taxes. There is other financial reasons why business owners should incorporate sooner rather than later in their business.
If entrepreneurs are ever going to apply for bank loans, either to buy a building to operate their business out of. Where to buy equipment or machinery they need to grow their business.
Financial institutions and banks typically will not loan money to unincorporated businesses. Therefore, in order to save time. So proprietors can incorporate sooner.
So that when they need to apply for a loan. That is not one more hurdle that they have to jump over, in order to get the approval that they need to grow their business.
With all of the benefits that come with incorporation. More sole proprietors should be finding out the facts and incorporating their business. So that they do not put their business at risk. And so that they can grow their business significantly.