Free consult & free copy of book

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

Contact Us


Most 5 star CPA Google reviews in Canada

Read Reviews

Chartered Professional Accountants E Myth

1 Fixed Monthly Fee - Planning | Accounting | Taxes | Consulting

Helping Canadian businesses beat the odds!

Edmonton Tax Accountant | Personal Tax Rate Versus Small Business Tax Rate

Many business owners want to become entrepreneurs in order to take advantage of small business tax rates in their business says Edmonton tax accountant. However, entrepreneurs who are not incorporated, and even some business owners who are, are not utilizing the corporate tax structure to minimize that tax. There are several things that business owners should know about in order to take full advantage of the corporate tax structure and pay as little taxes as possible.

Currently, the highest tax rate in Alberta is 48%. That is almost half of all the income that someone earns going towards income tax. Currently the small business tax rate in Alberta is 11%. There are significant tax benefits of being an entrepreneur says Edmonton taxes accountant. Business owners can utilize the corporate tax structure on income from active small business income. What active small business income is, is the income that is earned passively instead of from small businesses. This is income that someone can generate from stocks, bonds, rental income, dividends. All passive income cannot be included in the small business tax rates. The business must be active says Edmonton tax accountant.

In order for small businesses to take advantage of the 11% small business tax rate, they must be incorporated. Businesses that are not incorporated are not able to take advantage of this rate. Business owners who are making up to $500,000 every year can be taxed at a slower rate. This can significantly help entrepreneurs accumulate wealth. The reason for that is, the business owner who is able to take advantage of having a lower tax rate to them, will have more money that they can invest. By applying this method year after year, is can vastly impact the amount of wealth a business owner can accumulate versus business owners who are not incorporated cannot take advantage of the 11% tax rate.

Not only can help entrepreneurs accumulate wealth, it can also help them eliminate that quickly says Edmontons tax accountant. Using the same principles as accumulating wealth, business owners can use a lower tax rate in order to be able to put more of their money into debt repayment.

In addition to all of these benefits of lower tax, wealth accumulation and debt repayment, begin incorporated business can provide numerous benefits to business owners such as limited liability, business owners can decrease their personal liability simply by becoming incorporated. The Corporation shoulders the liability for the business owner. Being incorporated business also protects that businesses tradename, it will allow businesses to raise funds for the Corporation through obtaining loans, gives a business a certain amount of legitimacy, and very simply businesses who are not incorporated are less likely to be able to be hired by several companies. Edmonton tax accountant says there so many reasons why business owners should incorporate. They can start affecting their business in a positive way as well as help them make more money.

There are many reasons why entrepreneurs should consider as Edmontons tax accountant. Taking advantage of the small business tax rate would be one great reason. The personal tax rate in Alberta is currently the highest marginalized tax rate itís ever been at 48%. Meanwhile, the small business tax rate is currently 11% in Alberta. Business owners who are not incorporated and taking advantage of the small business tax rates are losing up to 37% of their potential income. There are many ways that business owners can take advantage of this lower tax rate that the small business tax rate allows.

The first thing that business owners to understand when it comes to small business tax rates, is that in order for them to take advantage of those rates, they must be incorporated. Edmonton tax accountant says only businesses that are incorporated are able to take advantage of that tax rate and businesses can make up to $500,000 every year at this tax rate. There are many reasons why business owners would want to take advantage of the lower tax rate, but the most common reason is so that entrepreneurs can accumulate wealth more easily. Since small business tax rates are 37% lower than personal tax rates in Alberta, a business owner who can take advantage of this corporate tax structure will have more money available them in order to invest. By investing more income a lower tax rate year-over-year, this can have a huge impact on how much wealth a business owner can accumulate.

Many professional businesses have recommended that they donít incorporate until they have paid off their debts, however Edmonton tax accountant recommends business professionals should incorporate sooner, and by doing that, they will be able to take advantage of the lower tax rates in order to put more of their money towards debt reduction. Business professionals will be able to pay off their debt a lot faster if they utilize the lower tax rates and incorporate their business quickly.

Many business owners often wonder at what amount makes incorporating their business worthwhile. Edmonton taxes accountant says that the threshold is around $50,000 per year. If there making more money than that per year, there gently spending more money on not being incorporated. Business owners can start saving money immediately as well as be able to take advantage of the small business tax rates says Edmontons Tax Accountant.

There are many other reasons why a business owner would want to consider incorporation says Edmonton tax accountant. Some of these reasons include being able to decrease their personal liability. By incorporating, theyíre able to be sheltered from some liability by allowing the Corporation to take on that risk. They are also going to be able to protect their tradename, be able to qualify for loans, it also gives their business and amount of legitimacy. And finally, some companies will not hire contractors who are not incorporated.