Edmonton Tax Accountant | Decreasing Debt Using Small Business Tax Rate
Edmonton tax accountant says that the Fraser Institute reports that the average Canadian pays 43% of their income in a variety of taxes including income tax, fuel tax, GST, employment insurance, CPP just to name a few. And in fact, the highest personal tax rate in Alberta is currently sitting at 48%, which is a jump from the 39% it used to be. Entrepreneurs who have not incorporated their business and paying far too much in tax, and even entrepreneurs who have incorporated, may not be utilizing the corporate structure in order to minimize their taxes much as possible. By utilizing the small business tax rate, business owners can eliminate debt both personal and in their business, accumulate their personal wealth faster, save money faster in order to buy assets for their business. Also, business owners can reduce taxes in their business by spreading out and producing tax from higher income years. There are several reasons why incorporating in order to utilize the small business tax rate is very important for business owners to know about.
A great way that business owners can use the small business tax rate to decrease their own debt, says Edmonton tax accountant, is that by paying less taxes business owners can put more money towards debt reduction. By paying only 11% instead of 48%, can ensure business owners are paying up to 37% more towards their debt servicing been they previously wouldnít be able to. This means, if the business owner is putting thousand dollars a month towards debt servicing, they would have to be paying $480 on taxes. By utilizing the small business tax rate, business owners can take that thousand dollars of debt servicing, and only pay hundred and $110 towards taxes, meaning they can put $890 towards debt servicing. They will be able to pay off their debts much faster this way.
The business owner will be able to apply this information to several facets of their business and personal life, by helping them accumulate wealth faster, and save money in order to buy assets much quicker says Edmontons tax accountant. Business owners need to utilize this method in order to significantly impact not only their business, but how much money they can save for their future.
Another way that business owners can utilize the small business tax rate in order to impact their business, is by spreading out how much money they are taking of their business in order to reduce taxes from higher income years. Edmonton tax accountant says business owners who are utilizing the corporate structure and the small business tax rate, can work with their accountant and plan how money gets brought into their business. If they had a very high, profitable year, they will want to plan how they can minimize the amount of taxes they pay on that high profit, by planning how to bring the money in throughout a long period of time in order to for businesses to not take a huge tax hit. Business owners who are not incorporated, and are a proprietor, cannot choose how to bring the money into their business. If they had a very big profitable year, theyíre going to take a huge tax hit.
Business owners who are not incorporated in their business says Edmonton tax accountant often pay too much tax. The highest personal tax rate in Alberta right now is 48%. Currently the small business tax rate is at 11%. 37% potential in tax savings is what business owners who utilize the small business tax rate can save. Entrepreneurs who want to significantly impact how much money they are able to save for their future, eliminate debt, and save to purchase assets in their business should incorporate their business in order to take advantage of that corporate structure. Also, business owners who incorporate can also help themselves save tax from higher income years through efficient tax planning with their accountant.
Business owners often have a lot of debt when they purchase their business whether itís through financing in order to buy their business, financing for various assets in their business, or even the debt they incurred in school in order to obtain their professional designation. Edmonton tax accountant says entrepreneurs can impact their business immediately by incorporating in order to take advantage of the 11% tax rate, and help them eliminate their debt quicker. By paying 37% lower taxes, business owners can put for more money towards debt servicing then they would if they were paying the personal tax rate. This can allow business owners to pay off their debt significantly faster, allowing them to save money for asset purchases in their business, or putting more money towards their investments to help them accumulate wealth for their future.
In addition to helping them decrease their own debt, purchase assets faster, and increase their wealth accumulation, business owners can also look forward to eliminating paying CPP on top of their tax. Business owners not only have to pay the employee portion of CPP, but they also have an employer portion that they must pay. This is roughly 10% on the first $50,000 that a business owner makes, which means thatís an additional tax of $5000 per year. Simply by incorporating, business owners no longer have to pay that tax which is an immediate $5000 savings in their business says Edmontons tax accountant.
There is also a great benefits to incorporating that are considered secondary benefits of incorporating says Edmonton tax accountant. Those benefits include a business owner being able to decrease their personal liability and eliminate some of the possibility of getting personally suit. The corporation will shoulder much of the liability. this doesnít mean that a business owner is no longer at risk for getting sued, but it decreases that possibility significantly. Other benefits of incorporating include protecting their tradename, qualifying for loans easier and getting a business owners business a certain amount of legitimacy..