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E-Myth – “Why most small businesses don’t work & what to do about it”

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Edmonton Tax Accountant | How To Utilize Small Business Tax Rate

Edmonton Tax Accountant has a favorite business quote by Michael Gerber, the author of this email says that the fail assumption is: if you understand the technical work of the business, you understand a business that does that technical work. Essentially, just because a dentist may be good at being a dentist, that doesnít mean they are good at running a dentist business. Business owners who are not incorporated, end up paying too much tax in business. The personal tax rates in Alberta are currently at 48% at their highest. Once a business owner incorporates, they can start paying 11% in taxes. By utilizing the corporate structure in business, business owners can minimize the amount of tax that they our pain, which can greatly impact their business.

One of the ways that business owners can impact their business through tax planning is because they can choose when they are going to draw salary or dividends from their business. This means that if a business owner has an extremely profitable year, they can plan for their accountant how theyíre going to draw out there dividends in order to minimize how much they are going to pay taxes. This is especially helpful if the business owner is going to have big expenses coming up, such as asset purchases, where they are going to have to pay for something like nobody says Edmonton tax accountant. Being able to methodically plan out when to take that money out, business owners can minimize paying high taxes when that money is first brought into the business. In addition, business owners who are planning on taking vacations, or sick leave, can plan out their salary draws in order to give them a salary while they are not in the business. This is especially helpful says Edmontons tax accountant because self-employed entrepreneurs do not qualify for employment insurance.

However, business owners actually utilize the small business tax rates in order to simply accumulate more wealth in their business and in their personal life says Edmontons tax accountant. How they do this, is through a variety of ways. By paying less taxes, business owners have more money in order to invest in their future or in their retirement. By being able to put more money we each year towards retirement, they can increase their wealth significantly. They can use the same method to pay off debts faster, whether itís educational debts, mortgage, braces, or even childrenís education and post secondary schooling, business owners will be able to significantly impact not only their life but there home life. This also will be able to save more money in order to more quickly be able to afford assets in their business. Whether they need to replace old equipment, or purchase new equipment in order to increase their business, business owners can drastically improve their life as well as their business by utilizing the small business tax rate in Alberta says Edmonton tax accountant.

Many entrepreneurs who were driven to become business owners simply because they wanted to pay less in taxes than they were being says Edmonton taxes accountant. The highest personal tax rate in Alberta is currently 48%. That is the highest marginalized tax rate in Alberta. Which means almost half of everything that is made, goes towards taxes. In fact, the average Canadian pays 43% of their income in taxes that include income tax, GST, fuel taxes, EI, CPP. After they are done paying that high amount of taxes, the average Canadian spends 37% of what is left on basic necessities such as food clothing and shelter. On the other hand, the small business tax rate in Alberta is at 11%. This is a significant savings that business owners can make in their business. However, Edmonton tax accountant says that business owners can only take advantage of that tax rate, if they incorporate their business. Not only do they have to incorporate their business to take advantage of that read, they also have to make no more than $500,000 each year. If they can meet those requirements, significantly reducing the amount of taxes that they pay can impact their business and their life.

Once business owners have incorporated, they should be able to use the corporate structure to minimize tax by efficient tax planning in their business. Business owners can strategize with their accountant in order to help spread out and reduce tax from their business. Edmonton tax accountant says this is extremely beneficial business owner has had an extremely profitable year, or if they are planning on having huge expenses, or if they are planning on being absent in their business either for vacations, honeymoons, or even maternity leave. A business owner will be able to work with their accountant to choose how the business owner is going to draw money out of the corporation through dividends or salary in order to minimize how much taxes theyíre going to pay on that money. If they have a huge profit in one year, they wonít have to pay all of the taxes on that as soon as the money comes in, like a business who is not incorporated would have to.

Businesses can also impact their finances, by increasing the amount of money they have towards investing in their retirement, paying towards conduct, or saving to purchase assets. Edmonton tax accountant says by paying a lower tax rate in their business, business owners will have more money at their disposal. For example, if the business owner is going to invest or pay off debt with thousand dollars, they would have to pay 48% on taxes and have the rest of the money that they could use on eliminating debt or investing in their retirement, or saving for assets. Edmontons tax accountant says by reducing the amount of taxes that a business owner pays to 11%, you take the same thousand dollars, and be able to invest or pay off debt or save $890 instead of $520.