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E-Myth – “Why most small businesses don’t work & what to do about it”

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Edmonton Accounting Firm | Why Operate a Corporation

While there is no rules set out by Canada revenue agency on when companies should incorporate says Edmonton accounting firm. It often is up to the business owner and their accountant. To figure out when the best timing is.

And while when the best time to incorporate is often a matter of saving money, and paying lower taxes. This is not always the only reason. Why people should incorporate their business.

In fact, one of the benefits that many people are not aware of. When it comes to incorporating their business. Is that it gives entrepreneurs limited liability.

Since there is not a zero risk associated with running any business. Even the ones that are extremely low risk. Business owners who are not incorporated. Are risking their personal assets to run their business.

If a business owner is not incorporated, if there company gets sued, it is the business owners assets, and finances that are at risk. This includes their home, and their investments, and even their savings.

However, Edmonton accounting firm says that once a business incorporates. It is the corporation that holds liability. And if the company gets sued. Then it is the assets and finances of the corporation that is at risk.

And while this does not mean the personal liability is zero. It does mean that it is much more difficult for anyone to get at the directors of the Corporation personally. And can help protect their assets.

Therefore, if a business owner has home that their family lives in, or investments that brings in another stream of revenue to their home. They may want to consider incorporating. If for no other reason than to protect themselves and their family.

Another reason why business owners may want to incorporate rather than running a proprietorship. Is because it can help protect their tradename. While some proprietors actually go to corporate registries to register their tradename. This does not offer any legal protection.

Any person or business may incorporate using that same name. And do so legally. Because registering the tradename is simply a placeholder.

Therefore, when a business incorporates, they legally protect the name that they are operating under. Ensuring that no other business can operate under that same name.

Another benefit to incorporating according to Edmonton accounting firm. Is that if entrepreneurs are ever going to work as independent contractors. And need to have a WCB number when they go onto a jobsite. It may be more difficult to obtain as a proprietor.

In fact, WCB often will not issue coverage to subcontractors. And until a business incorporates, may be considered a subcontractor by WCB.

However, once a business incorporates, WCB never questions if they are anything but the primary contractor. Making it so that a business can get their own WCB number, allowing them to walk onto any jobsite and have the coverage they need to work on it.

By understanding the wide variety of benefits that a corporation offers businesses. Can help them make the decision, on when the best time to incorporate is. So that they can protect themselves, and get more jobs that will help them grow their business.

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Many business owners start working for themselves says Edmonton accounting firm. Not really taking into consideration if and when they should incorporate their business.

However, if this is the case, business owners may end up paying far more in taxes than they should be. And while many proprietors think that there are so many costs associated with incorporating.

The amount of taxes that they can eventually save are more significant than the costs of incorporating. And maintaining that corporation.

The first thing that business owners should consider, is that the highest personal tax rate in Alberta is 48%. Proprietors must file their business taxes their personal return. And end up paying the personal tax rate on all of their business income.

However, Edmonton accounting firm says that incorporated businesses only have an 11% tax rate. Which means on taxes alone, many entrepreneurs stand to save a significant amount of money. Especially if they are making a lot of money each year.

And while there is a cost associated with incorporating the business. As well as the financial year end is a lot more involved. It often ends up costing the entrepreneur more money.

As well as the monthly financial reporting requirements that corporations have. Even all of this added up, and that being less expensive than the taxes entrepreneurs will have to pay. If they are making around fifty thousand dollars a year and net income or more.

Therefore, if business owners are wondering if it is in their best interest financially to incorporate. Should have a meeting with their Edmonton accounting firm. And find out specifically if they are paying more in taxes than they should.

And if they can save more money in the end, then they would pay in the fees associated with incorporating.

In fact, many business owners may not realize that as a proprietor, they are responsible for paying the employer and the employee portion of CPP. Often equaling more than fifty-two hundred dollars each year. Making them on the hook for over five thousand dollars more in tax than they were expecting to.

When that additional taxes factored into the calculation. Incorporation starts looking more more attractive to proprietors.

In addition to that, not only will it help entrepreneurs save money in taxes. It will also help them get money in the form of loans or financing. If they need to borrow money to buy assets, buildings, or equipment that is going to help them grow their business.

Since financial institutions and banks rarely lend money to proprietorships. If an entrepreneur is going to need to borrow money to grow. It is in their best interest to incorporate. So that they can be more likely to get the money they need. To help them see success.

By understanding all of the benefits that incorporating can give their business. Many proprietors can have that conversation with their Edmonton accounting firm. And make the decision that is most advantageous for them. Both financially, and otherwise.