Edmonton Tax Accountant | Incorporating To Accumulate Wealth

One of the ways that this can help business owners, is by allowing them to accumulate wealth much faster says Edmontons tax accountant. The reason for this, is a business owner will be able to put more money in their investments once they are paying less in taxes. For example, the business owner who has thousand dollars to invest, under the personal tax rate would have had to pay 48% in taxes, or leaving them $520 to invest. Business owners who are utilizing the small business tax rates, are only paying 11% in taxes, meaning they would have $890 to invest. Thatís significant amount more they will be able to put away, would result in increased accumulation of money in their investment portfolio. Which can help them significantly accelerate how much money they can accumulate.

Not only can business owners utilize this principle for accumulating wealth, but they can also use the same thing for eliminating their debt either personal or in their business, or saving money in their business in order to make asset purchases, or leaseholder improvements says Edmonton tax accountant. By paying less in taxes, business owners can put more money towards the things that make sense of their business.

Another way that incorporating business, is by helping business owners strategize with their accounting team in order to spread out and reduce tax from higher income years. This is an extremely important way of minimizing the taxes that they have in their business, by plan how to take money out of their business taking a huge tax hit. Edmonton tax accountant says this can help businesses. The time I the business owner is going to be there such as vacations, maternity leave or even medical leave. Since self-employed people donít pay EI. Should take full advantage of marginalized rates.

Business owners should understand that if they donít incorporate their business, eventually there will be a time where it will cost them more money not to be incorporated says Edmontons tax accountant. That amount of money is about $50,000 that a business owner would have to make in a single year in order to spend more money not being incorporated.

There are many benefits that a business owner would have for incorporating their business says Edmonton tax accountant. And those great benefits is by being able to pay less in taxes. The highest personal tax rate currently in Alberta is 48%, which is the highest marginalized tax rate. Meanwhile, the highest small business tax rate in Alberta is 11%. That means there is an automatic 37% savings business has just by taking advantage of the small business tax rate. Business owners should understand that in order to take advantage of that small business tax rate, they must be incorporated, and they must earn their income from an active business and not passive income. Examples of passive income are rental income, stocks and bonds as well as dividends. If they get their income from an active business, they can qualify for the small business tax rates. Businesses that make up to $500,000 a year can qualify. Once they make over that amount, you donít qualify for the small business tax rate anymore.

How this can help a business owner accumulate wealth Is by allowing them to put more money towards their investments. If they are paying far less in taxes, will have more money that they can put towards investing, and this can vastly impact how much wealth they can accumulate. By doing this every month, and every year for several years, that can greatly increase how much money that business owner has accumulated says Edmonton tax accountant. By utilizing this strategy in a number of different areas of their business and life, business owners can greatly impact their situation. They can use the same method to eliminate debt personal and business, as well as being able to save money in order to make asset purchases faster says Edmontons tax accountant.

In addition to being able to accumulate wealth faster, business owners who are incorporated can save paying CPP on top of their taxes. Edmonton Tax accountant says businesses that are not incorporated, must also pay the employer portion of CPP addition to the employee portion of CPP. It can be roughly 10% additional that businesses pay on top of their taxes. That is a lot of taxes that can be saved right away.

Another way that businesses can be impacted by incorporating, to strategize with their accounting team in order to spread out and reduce tax from higher income years. A business owner can work with their accountant in order to figure out how to take money out of their business in a way that does not have the paying higher taxes. Business owners that are unincorporated who have a hugely successful year, end up having to pay all of the taxes in that year. But if business strategize take money out, they can end up taking out money strategically to avoid paying higher taxes than they have to, which can also help them plan things that business such as large expensive, or medical leaves.