Edmonton Tax Accountant | How To Use The Small Business Tax Rate
Often, entrepreneurs want to go into business for themselves in order to take advantage of the small business tax rates says Edmonton tax accountant, but without the proper knowledge of how to do that, end up continuing to pay too much taxes. The average Canadian pays 43% in income taxes. Entrepreneurs should learn how to utilize the small business tax rates in order to avoid paying such high taxes, and help them accumulate wealth, pay down debt faster, and minimiz the effect of paying taxes in their business.
One of the first things that business owners should know when it comes to utilizing the small business tax rates in Alberta, is that they have to be incorporated in order to do that. There are significant benefits to incorporating, however minimizing taxes is one of the most utilized reason. Business owners who are able to utilize the corporate structure in a way to pay the least amount of taxes, end up with having more cash available to them in order to be able to invest. The lower tax rate means that for the thousand dollars that a business owner wants to invest, instead of spending 480 of the in taxes, they will be able to invest $890. By utilizing this corporate structure for minimal taxes year after year after year, entrepreneurs can significantly impact how much wealth they will be able to accumulate over several years says Edmonton Tax Accountant.
Another way that businesses are utilizing the corporate structure to pay minimal taxes, can also eliminate their debt much quicker by incorporating. By paying less in taxes, business owners also have more money in order to put towards debt repayment. This is extremely beneficial to professional businesses that incurred a large amount of debt in order to obtain their professional designation. Accountants, lawyers, dentists, lawyers are all examples of businesses that incurred a great amount of debt. They start their practice with a large amount of debt which takes them several years to pay off. They can accelerate how much debt they can pay off each year simply by incorporating their practice right away, and then being able to put more money towards debt repayment says Edmontons tax accountant.
Other benefits of being a lower tax rate, can help businesses save money in order to buy assets in their business. Edmonton tax accountant says that businesses that are able to pay less in taxes, end up saving more money and can accumulate wealth faster in order to invest in assets that can help them increase their business, replace equipment that needs replacing, or buying vehicles.
The other benefits of incorporating include decreasing their personal liability, protecting their tradename, be able to qualify for loans easier, giving their business increased legitimacy, and being able to qualify for working for companies who insist that their independent contractors be incorporated. These are all great reasons to incorporate a business, however if a business incorporates for no other reason than saving the tax amount, that would be reason enough.
There are many reasons why businesses would choose to incorporate says Edmonton tax accountant. But the most popular reason why, is for entrepreneurs to take advantage of the small business tax rates. Currently, the top personal tax rate in Alberta is 48%. That is an absolutely huge amount of taxes. Almost half of everything that a person makes it goes towards income tax at that rate. On the other hand, the small business tax rates in Alberta are currently at 11%. That is a 37% difference. The average Canadian pays 43% of their income in taxes, and pays 37% of the remaining income on basic necessities like clothing, food and shelter. That means the amount of money that an entrepreneur could be saving just by take advantage of the small business tax rate, is the same amount they would spend on basic necessities in their business. This is a huge impact in business, and businesses who are not incorporated are not able to take advantage of this great tax rate.
By incorporating their business, entrepreneurs can ensure that they are taking advantage of the 37% savings that the small business tax rate could give them. Any business is eligible as long as they are incorporated says Edmontons tax accountant, and as long as they are making up to but not over $500,000 a year. Thereís no reason why most businesses shouldnít take advantage of this small business tax rate immediately. They most popular way they can help entrepreneurs is through wealth accumulation says Edmontons tax accountant. The way business owner would utilize this to help themselves is because they are paying less taxes, which means they have more money in order to invest. For example, if the business owner has $1000 to invest, the personal tax rates would mean that they would have to give 480 of those investment dollars to taxes. On the other hand, business owners who are taking advantage of the small business tax rates in Alberta, would take that same thousand dollars and be able to invest $890. Thatís almost double the amount of money they could be putting towards investing for their future. By utilizing this method every year for several years, business owners can impact their wealth accumulation a great deal says Edmonton tax accountant.
They can use the same principles to eliminate debt in their business as well as personally, as well, businesses can save more money i order to save up to buy assets in their business. Whether it is to increase their services, replace old machines, or buying vehicles. Edmonton taxes accountant says all of these various ways business owners can impact their business as well as their own personal lives.
If business owners only choose to incorporate their business in order to save on the personal tax rate that would be well worth their time and effort says Edmonton tax accountant.