Edmonton Tax Accountant | Incorporating To Help Eliminate Debt

Edmontons tax accountant says one of the best ways that business owners can utilize this lower tax rate in order to impact their business, is through eliminating their debt. Whether the debt was incurred from purchasing their business, financing asset purchases, or if it was personal debt such as the amount of money it cost them to go to school, business owners can use the debt elimination strategy for all of these methods. All the business owner would have to do, is use the lower tax rate, to enable them to put more money into their debt repayment. For example says Edmonton tax accountant, if the business owner was paying thousand dollars towards debt servicing, being taxed at 48% would mean that a business owner was only actually putting $520 towards debt repayment. However, at the small business tax rate of 11%, that same thousand dollars is no getting $890 put towards debt servicing. This additional $370 a month that a business owner could put towards debt servicing, can help them eliminate their debt that much quicker says Edmontons tax accountant. Business owners can also utilize this strategy in order to save money for asset purchases in their business and help them put money into their investment portfolio for retirement.

Another significant way that business owners can utilize being incorporated in order to impact their business, is helping them strategize with their accountant how to take money out of their business in order to minimize paying taxes. This can help a business ownerís moveout the amount of money that they are taking out of their business on a monthly basis, and avoid big tax bumps. Business owners that are not incorporated, cannot choose and if they have big tax year, they will take a big tax hit. This is exceptionally beneficial for business owners who are planning to have big expenses in their business for are going to have an extended absence.

One of the most important things that business owners can do in their business in order to impact their business for the best, is to incorporate says Edmonton tax accountant. One of the most important reasons for incorporating, is for business owners to take advantage of the small business tax rates. Currently the small business tax rate in Alberta is 11%, which is 37% less taxes than the highest personal tax rate in Alberta. The highest marginalized tax rate is 48%, meaning people who are at this tax rates are getting taxed almost half of their income. Fraser Institute says that the average Canadian pays 43% of their income in taxes, and only 37% of the money that is left over goes towards basic necessities. Business owners can significantly impact their life for the better by incorporating their business for that tax rate.

Eliminating debt is an extremely powerful way that business owners can take advantage of this much smaller tax rate. The way business owner would do that says Edmonton tax accountant, is by simply paying more money into debt servicing. They will be able to afford that, because they will have more money at their disposal by paying less taxes. For example says Edmontons accountant, if the business owner is putting thousand dollars toward debt servicing, the 48% tax rate would mean they would only be able to put $520 towards debt. Meanwhile, businesses who are paying the 11% tax rate, can then stir putting $890 toward debt payment instead of 520. That increased amount, will make paying off that debt much faster.

Another way that businesses can use being incorporated to help them in business, is by being incorporated, businesses can choose how and when money gets brought into the business from the prophets. For example, Edmonton tax accountant says if the business owner has an extremely profitable year, they will want to use effective tax planning with their accountant in order to minimize how much taxes they pay. Businesses that are not incorporated have no choice how to take money out of their business and if they have a profitable year, they will have to pay a lot in taxes. Businesses who incorporate need to work with their accountant to utilize the corporate structure to minimize tax in their business as much as possible, to not only pay the 11% tax rate, but save even more taxes.

There are also many other benefits that are associated with incorporating their business says Edmontons tax accountant, including protecting their tradename, decreasing their personal liability in their corporation, being more able to qualify for loans, and being able to get hired on as independent contractors with companies who do not hire independent contractors who are not incorporated says Edmonton tax accountant.