Edmonton Tax Accountant | How Business Owners Can Use Small Business Tax Rate
Business owners whose businesses are not incorporated are paying too much tax says Edmonton tax accountant. Often, even businesses who are incorporated are not utilizing the corporate structure enough to minimize taxes. Business owners can greatly impact not only their business, but their life personally if they are able to utilize the small business tax rates. Since the average Canadian pays 43% of their income in taxes, there is a lot of money that business owners could be saving.
The highest personal tax rate Alberta currently is 48% says Edmontons tax accountant. This is the highest marginalized tax rate. On the other side, the small business tax rate in Alberta is currently 11%. That means business owners could be saving up to 37% in taxes simply by utilizing the corporate structure to minimize their tax. There are several things that business owners need to know before being able to utilize this corporate structure. Edmonton tax accountant says the first thing businesses need to know, is that they must be incorporated in order to get this rate. In addition to being a corporate, business owners can make up to but not over $500,000 per year. If business owners decide that this is the right decision for them, they can incorporate their business, and start working with their accountant in order to plan how theyíre going to utilize the corporate structure to minimize their taxes in their business.
One of the main reasons why business owners often want to become business owners, is in order to take advantage of the lower tax rate. By utilizing the lower tax rate, entrepreneurs are able to save more money, which allows them to invest more money for their future. By paying less in taxes, business owners have more money they are able to invest. Even if theyíre taking the same amount of money that they have to invest, by paying less taxes on it, business owners can vastly impact how much more wealth they can accumulate in their business by implementing this strategy year after year.
By being able to utilize this method in their business and their personal life, entrepreneurs can make great impacts. For example, utilizing the same method as Edmonton tax accountant, business owners can eliminate any debt they have more quickly, by being able to pay less taxes and pay more towards their debt servicing. As well, business owners can be able to save more money in their business in order to be able to afford purchasing assets in their business much sooner. These assets can be replacing old equipment, or buying new equipment to add services to their business, or even buying vehicles.
By utilizing corporate structure to minimize tax, business owners can impact their business in great ways, and change their own future, by allowing them to be able to have the retirement they want, or spend the money theyíve invested on vacations, children, paying off homes.
There are a great many benefits that business owners may have two incorporating their business says Edmontons tax accountant. But one of them is simply by being able to save the amount of taxes that they are paying in their business and their life. Currently, the highest personal tax rate in Alberta is 48%. Thatís almost a person makes being taken away for taxes. However, business owners who can incorporate, or able to take advantage of the small business tax rate. That rate in Alberta is currently only 11%. That is a significant difference. Instead of getting half of what they make, business owners are then only being about 1/10 of what they make to taxes. There are certain things that they must keep in mind in order to qualify for the small business tax rate. Edmonton tax accountant says forcing business owners must do is be incorporated in order to get the small business tax rate. Once there corporate, they have to not make more than $500,000 per year.
Once a business owner incorporates, thereís several ways that they can use the lower tax rate to impact their business, but there are also a huge variety of reasons why businesses should incorporate. Including having limited liability in their business, simply by incorporating, the corporation takes a significant portion of a business ownerís liability, decreasing how much they are at risk. In addition to that, business owners can protect their tradename. Despite what they may think says Edmontons tax accountant, business owners who have only registered their tradename, did not own legal right to that. By registering it, anyone could incorporate the name after that, and they would then own the legal rights to the tradename. Business owners can incorporate and then on the legal right to their tradename, protecting it. Other benefits of incorporating including be more likely to qualify for financing, getting their business legitimacy, and being able to get hired on with businesses that will not hire unincorporated contractors.
Another benefit of being incorporated, means that businesses donít have to pay CPP on top of their tax anymore. Before incorporating, businesses have to pay roughly 10% on the first $50,000 they make, which works out to $5000 per year in CPP payments. Edmonton tax accountant says business owners need to keep in mind that not only are they paying the employee portion, but the employer portion of CPP each year.
The main benefit of incorporating and taking advantage of the small business tax rates, is by being able to pay less taxes, therefore using that money in order to invested. Edmonton tax accountant says by being able to put more money into investments every year, year after year will be able to significantly accelerate their wealth accumulation. By using the same method in order to eliminate debt, or purchase assets in their business, utilizing the small business tax rate can greatly impact a business owner in their business, as well as in their personal life.