Edmonton Accounting Firm | Why Incorporate a Business
There might be many circumstances that an entrepreneur has when they start their business says Edmonton accounting firm. Which might result in an entrepreneur owning a proprietorship.
And while there is no real reason why a business owner should not own a proprietorship. There are many benefits to incorporating.
Entrepreneurs might want to hold off on incorporating their business. Until they have earned more money in their proprietorship. Because of the additional fees associated with incorporating their business.
While the fee to incorporate might not be significant. They will then have monthly reporting requirements. In addition to having a more expensive corporate year-end. Then there proprietorship year and that they might be used to now.
And until a business owner is making a significant amount of money in their business. Or until they are doing it as their main job. They may not want to incur the costs associated with incorporating.
However, there are many benefits to incorporating. That business owners may want to know what those benefits are. So that they can make the decision on whether to incorporate their business or not.
One of the most significant benefits to incorporating. Is that it protects the business owners personal assets. Since there is some risk associated with being an entrepreneur. If a business owner ever gets sued. If they are proprietor. It is their personal assets and personal finances that are at risk.
However, once a business owner incorporates. The corporation holds the liability. Minimizing the ability to affect the assets and finances of the directors of the company personally.
While this does not make an entrepreneurs risk zero. It makes it significantly reduced. And while company might have its assets or finances affected by a lawsuit.
The ability to shelter the business owner is the function of the corporation. Many entrepreneurs who own proprietorships decide to incorporate based on that protection alone.
Another reason why a proprietor may want to incorporate sooner rather than later. Is to protect their tradename. Edmonton accounting firm says the assumption is once a business owner has registered their tradename at corporate registries. That their name is protected legally.
However, that is not the case. And other businesses can incorporate that tradename legally. So if a business owner does want to protect their name. They should incorporate their business sooner.
Another benefit to incorporating. Is that they are going to be able to be allowed on more jobsites than they would if they were a proprietor. Because it might be difficult or impossible to get WCB number as a subcontractor.
However once an entrepreneur incorporates. They will be considered the prime contractor, even if hired by another company to work on the jobsite. Which will allow them to land far more jobs then if they could not get WCB number before.
For a wide variety of reasons from protecting themselves, to protecting their company. To be able to land more jobs than they were before. And makes a lot of sense for business owners to incorporate.
They should make an appointment with their Edmonton accounting firm. And find out more about how to incorporate, and what it will mean for their business.
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Since there is no rules or regulations around when a proprietor should incorporate their business says Edmonton accounting firm. Many people who own proprietors. May not realize when the most ideal time to incorporate would be.
And while there are lots of reasons why incorporation can protect business owners. From protecting them from lawsuits, and protecting their tradename. There is also a lot of financial benefits that entrepreneurs can gain. Once they go from a proprietor to unincorporated business.
The first thing that proprietors should know. Is that since proprietors end up doing their business taxes alongside their personal tax return. Proprietors end up paying personal tax rates on their business income.
Now while that does not necessarily sound like a bad thing. The highest personal tax rate in Alberta is currently 48%. But businesses that are incorporated only have to pay 11%.
And while many proprietors might think they have to make a significant amount of money in order to and up saving enough in taxes. To make the additional fees of incorporating, and filing tax returns worthwhile.
The amount of money that a business owner has to make per year. In order to make it more beneficial. Is much less than they assume.
Edmonton accounting firm says that business owners who make fifty thousand dollars a year that income. Are going to be better off to incorporate their business.
Because the fees that they will have to pay to incorporate, and the additional accounting fees. Will be less than the taxes they will end up paying if they do not incorporate.
In addition to that, proprietors might be hit with additional taxes at the end of the year. Then they realized they were going to end up paying.
For example, many proprietors may not realize that they have to pay both the employee and the employer portion of CPP. Which is an amount that can equal over five thousand dollars in additional taxes each year.
When the 37% tax savings that they might enjoy from incorporating is added to the over five thousand dollars of additional taxes. Suddenly, the benefits of incorporating make a lot more sense.
And while saving taxes can be a huge and if it. It also will help entrepreneurs apply for business loans. Because entrepreneurs were not incorporated. May not be awarded financing or loans. Because banks and financial institutions typically will not loan money to unincorporated businesses.
If entrepreneurs ever going to grow their business through purchasing assets or buildings. They should incorporate sooner rather than later. To make it more likely that they can become approved for the loans they need.
When entrepreneurs understand all of the benefits surrounding incorporation. They will be able to contact their Edmonton accounting firm. And make the decision that is most beneficial for them and their business. So that they can continue growing their business.