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Most important thing for business owners to know, is that they have to be incorporated in order to get that tax rate says Edmontons tax accountant. However, the amount of money that they save through the taxes by incorporating, often pay for the additional expenses that incorporating can incur. Itís also very important for business owners to know that they can earn up to $500,000 per year and still be paying this 11%. Thatís a significant amount of money that a business owner can make, and only pay 11% taxes. Many business owners want to know how much money they need to be making per year in order to make incorporating worthwhile. Edmonton tax accountant says that business owners who are only interested in utilizing incorporation for the tax break, should know that the breakeven point is $50,000 in a year. If they make more money than that, they are spending more money in order to not be incorporated.
The way that business owners can utilize this small business tax rate in order to help them accumulate wealth, is by being lower taxes, entrepreneurs can put more money towards their investment portfolio. For example, an entrepreneur who has $1000 to invest, will have to pay $480 in taxes, which means they are only saving $520. Simply by utilizing the small business tax rate, when they have $1000 to invest, they only have to put hundred and $10 towards taxes, meaning they can put $890 into their portfolio instead of $520. By doing this every month, for several years, that can make a significant impact on how much wealth they are able to accumulate.
There are also secondary benefits to becoming incorporated says Edmonton tax accountant. Being able to decrease their personal liability in business is a huge one. Since the corporation takes on much of the liability, business owners can reduce their liability an minimize their risk of being personally suit. It doesnít completely eliminate their liability, but it significantly decreases at which can be very important for business owner.
Business owners often want to go into business for themselves, in order to impact how much money they have for the future says Edmonton tax accountant. Since employees are not able to impact how much money they bring in, business owners have the ability to generate an unlimited amount of revenue in their business by increasing sales. Since there is no limits on how much money a business owner could generate for their business, they have unlimited potential on how much they could make. Many entrepreneurs are driven by the idea that they can impact how much money they save for their future. By utilizing the small business tax rate, business owners can not only make unlimited revenue potential in their business, but significantly impact how much wealth they can accumulate for themselves for future plans.
The first way that business owners can accumulate wealth this way, is by paying a lower taxes. Since the small business tax rate in Alberta is 11%, and the personal tax rate is 48%, business owners can immediately start saving significant amount of money simply by incorporating. How this helps him with wealth accumulation says Edmonton tax accountant, is by allowing them to pay lower taxes, they can put away far more money into their portfolio. For example, a business owner who wants to save thousand dollars per month, under the personal tax rate, would have to pay $480 in taxes on that, meaning that they are only saving $520 a month instead of that thousand. Once a business owner incorporates, and starts utilizing the small business tax rate, they can take $1000, and only pay hundred and $10 in taxes. This means that they can put $890 towards their investment, instead of $520. This is almost double, and when utilizing this strategy month to month and year to year, business owners can significantly increase how much wealth they can accumulate in their portfolio for their future.
Business owners can also eliminate debt for quicker this way. If they use the lower tax rate, they can put much more money towards debt reduction. Whether this is for the costs they incurred getting their professional designation, or financing they needed to purchase their business, or get assets. Business owners can pay down their debts faster once they are only paying 11% in taxes says Edmontons tax accountant. Business owners can also use this method to save more money in order to be able to purchase assets much quicker. By paying lower taxes, they can save their money. This is especially important if business owners are not able to secure financing for asset purchases.
Another great way that incorporating in order to pay the small business tax rates can impact the business says Edmonton tax accountant, is that business owners can stop paying CPP on top of taxes. Businesses who are not incorporated have to pay approximately 10% for every $50,000 they make in their business. Which works out to an additional $5000 per year for CPP. Business owners not only have to play the employee portion of CPP, they also have to pay an employer portion, which is quite a bit more taxes. By incorporating, business owners can eliminate this tax completely.
