Edmonton Tax Accountant | Incorporating To Decrease Debt

One of the first things that can help business owners once they incorporate, is using the minimized taxes in order to decrease their own debt. How this works says Edmonton tax accountant, is by allowing business owners to put more of their own money towards debt reduction instead of paying taxes. For example, a business owner who has $1000 to put onto their debt servicing will have to pay for hundred and $80 towards debt servicing. Meanwhile once they incorporate, they will be able to pay 11% in taxes and put $890 towards their debt servicing, allowing themselves to pay off that debt much quicker than they previously had been able to. By implementing the strategy for accumulating wealth by being the increased money into RRSPs or stocks and bonds, business owners can have a huge impact not only in their business but in their personal life to.

There are other benefits to incorporating says Edmonton tax accountant, and one of those ways is by being able to strategize with their accountant on how to bring money into their business after a big profit year. Business owners can strategize with their accountant on how to take money out of their business strategically in order to avoid big tax bumps, as well as being able to take out money strategically in order to pay for large expenses, or if the business owner is going to be taking a leave from their business for an extended vacation, maternity leave or medical leave.

There is also secondary benefits of incorporating says Edmontons tax accountant and one of those secondary benefits is a business owner will have decreased personal liability in their business. Once they incorporate, the corporation shoulders a lot of the liability in the business, decreasing the business owners chances of getting sued.

One of the reasons why business owners would want to incorporate says Edmonton tax accountant is to decrease the amount of taxes they have to pay. The average Canadian according to the Fraser Institute, pays 43% of their wages in a variety of taxes that include but are not limited to income tax, CPP, GST, EI, fuel tax just to name a few. The average Canadian then spends roughly 37% of their remaining income on their necessities like shelter and food. Thatís a significant amount of taxes that the average Canadian pays, and the highest personal tax rate in Alberta currently is 48%, meaning almost half of what is being made is being taxed. Many business owners want to avoid this happening to them, therefore they become business owners and and take advantage of the small business tax rates. The small business tax rates in Alberta are currently 11%, which means business owners can immediately save 37% in taxes simply by incorporating.

How this significant savings can help them decrease debt says Edmontons tax accountant, is by allowing business owners to take the amount that they are saving, and put it towards their debts. Whether the deaths are personal debts, debts from becoming a professional in their field, such as doctors, lawyers or dentists. Or if business owners would like to pay off the debt that they incurred by purchasing their business, or financing assets purchases or leaseholder improvements. By being able to save more money instead of paying taxes, business owners can increase how much money they put towards debt servicing in order to pay off their debt quicker. Business owners can actually use this strategy in order to save money in their business as well, in order to pay for asset purchases. By saving more money because theyíre not paying taxes, business owners will be able to accumulate more money in order to invest in assets. This is extremely important says Edmonton tax accountant, because as businesses age, they are less likely to qualify for financing. Business owners can also do this in their personal life to increase the amount of money they are putting into their RRSPs therefore increasing how much wealth they can accumulate for their retirement says EdmontonsTax Accountant.

Another way that business owners can use incorporation as a way of impacting their business, is by being able to plan with their accountant the money that they bring into their business to minimize taxes. For example says Edmontons tax accountant, if the business has a very high profit year, business owners might want to work with their accountant to take that money out the, in order to avoid any major tax says Edmonton tax accountant. This can help business owners plan for large expenses, vacations, maternity leave or medical leave. Since business owners do not qualify for EI, they must be able to plan how to continue to get paid.