Edmonton Accounting Firm | Why Sole Proprietors Should Incorporate
Edmonton accounting firm | why sole proprietors should incorporate
Even though there are many benefits of incorporating according to Edmonton accounting firm. From saving taxes, to protecting personal assets and tradename. Many sole proprietors are not aware of all of the benefits. And instead, see incorporation as an additional expense to their business.
And especially when entrepreneurs are first starting out. It can be an extremely important thing for business owners to do, to minimize the amount of money that they are spending within their business.
However, not only is incorporating a important way for businesses to save taxes. But there are also many benefits that are worth a proprietor incorporating for. Because of how these benefits can positively impact their business.
The first thing that Edmonton accounting firm will let proprietors no. Is that by incorporating, they are actually protecting their personal assets.
Many proprietors may not realize that they are personally liable if they get sued while conducting their business. Even if they have a business that they run part-time. Or even if their business is extremely low risk.
The risk to themselves personally is never zero. Business owners, especially if they have assets like a family home. Or if they have personal savings, or investments. These can be at risk as well. If they simply operate a proprietorship.
All they have to do however to limit that liability is to incorporate their business. Their corporation then holds the risk according to Edmonton accounting firm. So that if the company gets sued. All of the directors personal assets will be protected.
And with how important this is. Entrepreneurs that have no additional monetary benefits to incorporation. Will often choose to incorporate. Just so they do not end up losing the family home. And ending up homeless, if something goes wrong.
However, this is not the only benefits to incorporation. Business owners can also protect their tradename by incorporating. Unfortunately, many entrepreneurs make the assumption that registering their tradename at the corporate registries office will be enough to protect their name. However this is not true.
This acts as a placeholder. But cannot legally stop someone else from incorporating under that same name. Therefore, if business owners want to protect that name. And ensure that nobody else can use it. They should incorporate their business.
And while these are important enough reasons why business owners should incorporate their business. There are still many more benefits that entrepreneurs can enjoy through incorporation.
For example, sole proprietors may not be able to get a WCB number. However will often require one to get on most jobsites as a contractor.
Therefore, it will be extremely limiting for a sole proprietor who is a contractor. Therefore by incorporating, they can be guaranteed to get that WCB number. That will allow them the ability to go onto any jobsite. Which will increase the number of jobs that they are able to get.
By understanding all of the different benefits that come with incorporation. Can help entrepreneurs make the decision on whether incorporation is right for them or not.
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Business owners should understand that even though there is costs associated with incorporating their business says Edmonton accounting firm. There also a lot of financial benefits as well.
In fact, most proprietors can end up saving so much money in reduced taxes. That it is more financially beneficial to incorporate than it is to remain a sole proprietor.
To understand this, sole proprietors should keep in mind that when they file their business taxes as a proprietor. They file at the same time that they file their personal taxes.
They will pay the personal tax rate in their tax bracket for their business income. And while this does not seem like a big deal. Entrepreneurs should take into consideration. The highest personal tax rate in Alberta is currently 48%.
Meanwhile, went incorporated businesses will get taxed on for their business income. Is only 11% taxes. Therefore, depending on what tax bracket a person is in. They can save up to 37% in taxes. Which can be a significant amount of money. Depending on how much money and entrepreneur has generated that year.
And when calculating this amount of savings, the amount of money that businesses will make. In order to make incorporating the less expensive option. Is if a business has fifty thousand dollars in net income before paying themselves.
Therefore, if sole proprietors are close to that threshold. Or are over that amount of money. It is definitely in their best interest to incorporate. Because not only will they save in taxes. They will also enjoy all of the other benefits that incorporation has to offer.
Something else for business owners to keep in mind. Is that if they are sole proprietors. And they will ever need to obtain a business loan. They will not be able to qualify if they are not incorporated.
While Edmonton accounting firm is not ready to say it is absolutely impossible. But they have never seen as sole proprietor qualify for business loan before.
Because of that, if a business is ever going to require a loan. Whether it is to purchase assets like equipment or machinery. To help them increase their productivity at work.
Or if there ever going to buy a building. To help them increase their productivity, and pay a lower amount for their rent. By owning the building. They should think about incorporating their business sooner rather than later.
The last thing that a business owner will want, is to stall their loan application. By having to incorporate their business first. Before completing their loan application.
When business owners understand all of the benefits of incorporating. From saving taxes, to applying for loans. And benefits including limiting their liability. As well as being allowed on more jobsites and protecting their tradename.
Business owners should make an appointment to meet with their Edmonton accounting firm. To talk about when the best time would be for them to incorporate their business.
So that they can enjoy all of these benefits that incorporation offers them. The sooner business owners can do this, the sooner they will save taxes, and benefit.