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Edmonton Tax Accountant | Accumulating Wealth Using A Small Business Tax Rate
Business owners who incorporate, are able to utilize the small business tax rates in order to be able to accumulate their wealth in their business much faster says Edmonton tax accountant. Fraser Institute says that the average Canadian pays 43% of their income in various taxes, and only spend 37% of the remaining income on their basic necessities that include food and shelter. Business owners who are not incorporated, are being taxed at the personal tax rate, which tops out at 48% in Alberta currently. Business owners can immediately impact not only their business, but their personal lives by incorporating their business in order to utilize the small business tax rate.
There are several things that business owners should take into consideration when they are thinking about taking advantage of the small business tax rate in Alberta. The first thing they need to know is that they have to be incorporated. Edmonton tax accountant says business owners that make around $50,000 in their business is the breakeven point. If business owners are making more money than that in their business, they are spending more money in order to not be incorporated, and they should incorporate right away they also need to know that there is On how much money they can make in a year at the small business tax rate. Business owners who make more than $500,000 each year, can no longer pay this lower rate. Once business owners incorporate, they can start taking advantage of the 11% small business tax rate and impact not only their business, but their personal life.
Edmonton tax accountant says many business owners want to become entrepreneurs in order to help them accumulate wealth for their future. By paying lower taxes, business owners can save more money into their investments each year. For example, business owners who are trying to put thousand dollars per month into their portfolio, will have to pay for hundred and $80 into taxes at the personal tax rate. However, once they incorporate, entrepreneurs can put $890 into their portfolio, because there only paying $110 towards taxes. This is significant for business owners, who are trying to accumulate wealth for their future. By paying $890 a month instead of 520, business owners can make a huge impact on how much money they set aside every year.
Another way that business owners can utilize the small business tax rates, is by tax planning in their business. By being incorporated, business owners can spread out how much money they take out of their business in order to reduce taxes. This is especially beneficial if business owners have had an extremely profitable year, and they want to minimize the taxes they pay on that profit. It is also beneficial says Edmontons tax accountant if business owners are planning on having a huge expenses in the future year, or are taking any time off for extended vacations or even things such as maternity or paternity leave, since business owners and those who are self-employed do not get employment insurance.
Many people are unaware that the average Canadian pays 43% of their income in a variety of taxes that include income tax, CPP, GST, EI, fuel tax, just to name a few says Edmonton tax accountant. Those same Canadians pay 37% of whatís left of their income on their basic necessities that include shelter and food. The highest personal tax rate in Alberta right now is 48% which is the highest marginalized tax rate. It used to be 39%, but it had recently gone up almost 10%. There may be no end to how high the personal tax rate can climb. Therefore, many business owners became entrepreneurs in order to avoid paying the high personal taxes. Not only are business owners able to pay less in taxes with the small business tax rates, but business owners are also able to impact how much money they make in their business, because they have an unlimited potential to increase the revenue in their business, unlike employees who make a wage and have no ability to significantly increase their wealth.
Since accumulating wealth is so important, business owners need to know how they can utilize the small business tax rate in order to achieve that goal says Edmontons tax accountant. Once they incorporate their business, they can use the small business tax rate and start paying only 11% in taxes. How this helps with wealth accumulation says Edmonton tax accountant, is allowing a business owner to put more money towards investing. For example, if the business owner is hoping to save $1000 a month for their portfolio, at the personal tax rate of 48%, they would have to pay for hundred and $80 towards taxes, meaning they would only be able to invest $520 per month instead of thousands. However business owners who have incorporated and are taking advantage of the small business tax rate are able to pay only $110 towards taxes, meaning they can put $890 towards their portfolio. Itís very easy to see how this can greatly impact how much wealth they can accumulate. If business owners do this consistently every month over a period of several years, and can make a huge difference how much they are able to accumulate says Edmontons Tax Accountant.
Edmontons tax accountant says that by utilizing this strategy in their business, entrepreneurs can eliminate their debt quicker, as well as save money in their business in order to purchase assets quicker. Purchasing assets quicker is extremely important, because as a business owner operates there business, they tend to have a high cash crunch risk, and are less likely to get financing.
Business owners can impact their future greatly, just by taking advantage of the small business tax rate in their business and not only save money for their future, but eliminate their debt and make purchases they need to help their business grow and be successful says Edmonton tax accountant.