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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 | Take Advantage Of Small Business Tax Rates

Edmonton tax accountant says that The Fraser Institute reports that the average Canadian pays 43% of their income in taxes, and by comparison only 37% of their remaining income goes towards basic necessities such as food clothing and shelter. While the reasons why entrepreneurs are driven to own their own business, as in order to take advantage of the lower tax rates they can get by being a small business owner. In order to take advantage of these tax rates, business owners need to be incorporated. Once they are incorporated, there so many advantages that they can start utilizing due to the small business tax rates.

First thing that business owners should understand when it comes to the small business tax rates, is that currently in Alberta they are 11%. On the other hand, Edmonton tax accountant says the personal tax rates in Alberta are the highest marginalized tax rates, and at their highest are 48%. That means business owners can save up to 37% in taxes alone simply by incorporating their business. This is for the income that they make from an active business. Any passive income that they have such as stocks, bonds, rental income or dividends is not included in being able to have the small business tax rates being taken advantage of.

Once a business owner incorporates this is Edmontons tax accountant, they will be able to immediately start advantage of all the benefits from the small business tax rates. One of the most common ways that business owners utilize this lower tax rate in order to help increase wealth, is by allowing them to invest more of their money. Since business owners who are able to take advantage of the lower rates, they will have more money available to them to invest. By utilizing this method every year for several years in a row, business owners can make a great impact on how much money they can invest for the future. By utilizing this same method, business owners can also eliminate their debt quicker. Lawyers, doctors, or accountants often have taken on a lot of debt in order to become those professionals, so by becoming incorporated, they will be able to use their lower tax rate to put more of their money into debt reduction.

This can help business owners purchase assets in order to grow their business. Whether they are purchasing new equipment to help increase the business, replacing all equipment or buying vehicles, Edmonton tax accountant says that business owners will be able to save money to purchase assets much faster by utilizing this corporate tax.

There are many other benefits to being incorporated, that businesses can enjoy such as decreasing the amount of liability they carry personally. The corporation is able to take on much more risk, enabling the business owner to be less liable. Business owners who incorporate, are also able to protect their tradename. Despite the fact that many business owners believe that by registering their tradename, that it legally protects that name, but thatís not true. By incorporating their tradename, that gives them more protection.

Business owners who are incorporated, but are not taking advantage of the corporate structure to minimize taxes are missing out on a huge opportunity in their business says Edmonton tax accountant. Currently the small business tax rate in Alberta is 11%. However, the personal tax rate is at 48%, which is the highest marginalized tax rate. By not utilizing tax benefits that come along with incorporating, business owners are paying up to 37% more in taxes than they actually need to. There are several benefits to incorporating, and utilizing corporate structure in order to minimize tax is one of the biggest reasons.

One of the ways that business owners can utilize the corporate structure to impact their business is because they will be able to choose when money gets brought into their business. For example, Edmonton tax accountant says if a business has a huge year where they have made a ton of money, but a business owner knows that they are going to have to pay for a wedding in the upcoming year, or if theyíre going on a long vacation, or even if theyíre facing maternity leave for example, they will be able to work with their accountant in order to plan how much money they bring in and when they bring it in, in order to minimize the amount of taxes they have to pay. Unincorporated businesses donít have that ability, if they have a huge year and they have a huge profit, they have to pay high amounts of tax. By utilizing the corporate structure, business owners can be more methodical and minimize how much tax they pay because they will be able to control how much money they bring in over the year.

Another way that business owners can utilize the small business tax rates is in debt reduction and wealth accumulation. Edmonton tax accountant says that by paying less in taxes, they will end up having more money in order to put towards investments or debt repayment. By utilizing this method every single year over several years, business owners can either accumulate much more wealth than they previously would have been able to, or pay off their debts much faster. They may even be pursued both at the same time, how much money they can save.

Other benefits of incorporation include decreasing their personal liability business. The reason for that says Edmonton tax accountant, is because by incorporating, the corporation takes on a certain amount of the liability, which protects the business owner. Not only does it protect the business owner, it can protect the business is tradename. Despite most people believing that registering their tradename protects it, incorporating that tradename gives a business owner the legal right to it. Incorporating can also help business owners be able to qualify for financing, it gives a business legitimacy, and often quite simply being incorporated will mean that businesses will be able to be hired by companies who refuse to hire contractors who are not incorporated.