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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 | Incorporating To Save Money

The highest personal tax rate in Alberta is currently 48% says Edmonton tax accountant, which is a 9% increase from the last rate. many people wonder if many people actually pay this high tax rate, and the Fraser Institute says that the average Canadian pays 43% of their income in taxes, which means most people are not far off of that. Business owners who incorporate however says Edmontons tax accountant, only pay and 11% small business tax rate. This is a 37% savings, that can greatly impact the business owner in a variety of ways.

One of the ways that this much lower tax rate can impact the business owner says Edmontons tax accountant, is to help them save money. Business owners who are trying to save money, especially in their business in order to purchase assets, will be to save almost twice as much money in the same amount of time through paying a lower tax rate. This is because they will be able to pay for less in taxes, meaning the money that they would put into paying taxes can help go into saving money. Itís extremely important is that a business owner has a plan in their business for saving money, especially because as businesses operate, they have the potential for a cash crunch, which makes them less attractive to a financial institution to loan the money. By saving money in their business, business owners can prepare for asset purchases, on the off chance that they will not qualify for loans in the future. By using this same strategy, business owners can also eliminate debt quicker as well as accumulate their wealth faster says Edmonton tax accountant.

Another way that business owners can utilize incorporating their business in order to benefit their business, is simply by incorporating their business, business owners can stop paying CPP on top of their tax. Businesses who are not incorporated have to pay the employee portion of CPP as well as the employer portion, which is roughly 10% of what the business makes. That can be a significant amount that a business owner has to pay every year. By incorporating says Edmontons tax accountant, business owners can save that 10% immediately.

Thereís also several secondary benefits of incorporating a business says Edmonton tax accountant, those benefits include a business owner being able to decrease their liability in business by incorporating. Once they incorporate, the corporation takes on a significant amount of liability for the business owner. This doesnít mean that a business owner has no risk of getting sued ever says Edmontons tax accountant, but it produces that chance significantly other benefits of incorporating include being able to be hired by a company who wonít hire independent contractors unless they are incorporated, getting a business a certain degree of legitimacy that unincorporated businesses donít have, helping business owners qualify for loans, and protecting their tradename. Many business owners are not aware that must they incorporate, they donít owned legal rights to their name.

Businesses that are not incorporated not only are paying too much in taxes, they are also not utilizing the corporate structure in order to efficiently tax plan within their business, to minimize paying even more taxes says Edmonton tax accountant. Since business owners who are not incorporated, have to pay personal taxes, the highest personal tax rate in order currently is 48%, and the Fraser Institute actually did a study that shows that the average Canadian pays 43% of all of the wages in a variety of taxes. Business owners can immediately decrease the taxes that they pay simply by incorporating their business. The small business tax rate in Alberta currently is 11%, business owners can start taking advantage of that tax rate as long as they incorporate. With that all their income comes from an active business, which means passive income is not qualified to get the small business tax rate on. As long as business owners are making less than $500,000 in a year, they will be able to enjoy this 11% tax rate.

One of the benefits of this lower tax rate, is this will allow business owners to save a lot more money in their business says Edmontons tax accountant. By paying the sick if it can be less in taxes, up to 37%, business owners should be able to save 37% more than they previously were able in order to save money. This is especially beneficial to businesses who have been in business for a while, and may not qualify for financing for asset purchases or leaseholder improvements says Edmontons tax accountant. By taking advantage of this lower tax rate, business owners should be able to put more money into savings, enabling them to have the money to buy assets a lot sooner.

Another way that businesses can benefit from the corporate structure they will get from incorporating, is being able to tax plan with their accountant, to help them take money out of their business efficiently and in a way that can minimize big tax hits. This is especially beneficial to business owners who have had an extremely profitable year in one year says Edmonton tax accountant. If business owners are planning big expenses, or any amounts of time whether going to leave the business for certain period of time such as vacations, maternity leave or medical leave, this can help business owners plan how to take money out of the way that not only minimizes taxes, but allows them to continue to take a wage even when they are not in the business.

Secondary benefits of incorporation says Edmonton tax accountant, are decreased personal liability. By incorporating, business owners can decrease their personal liability because the corporation will take on much of that liability. This will mean that a business owner is less likely to get sued in their business. It wonít eliminate the possibility entirely, but limit it significantly.