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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 | Why Incorporate


Entrepreneurs who are not incorporated, or not taking advantage of the small business tax rate says Edmonton tax accountant currently the personal tax rate in Alberta is 48%, which is the highest marginalized tax rate. Many entrepreneurs want to become incorporated in order for them to take advantage of the much lower tax small business rat currently those Alberta are sitting at 11%. This can greatly impact businesses, if they are able to take advantage of the corporate structure to minimize their taxes is much as possible.

The most common reason why entrepreneurs would want to have a lower tax rate, is in order to help them save money for the future. Wealth accumulation is one of the biggest reasons why business owners would want to run their own business says Edmontons tax accountant. Business owners who pay less taxes, can put more money away into investments. By doing this every year for several years, a business owner can put away a much higher amount of money than they would if they were still being taxed under the personal tax rate.

Another common reason why business owners would want to incorporate in order to take advantage of the smaller tax rates says Edmonton tax accountant, is so that a business owner can have more choice on when to bring money into their business in order to help them do better tax planning in their business. By being able to choose what to bring money into their business, business owners can even out the amount of money that they bring into their business. This can be especially helpful if a business owner has had an extremely profitable year, and they want to avoid paying huge amounts of taxes in their business. They will be able to spread out the amount of money they bring in over a larger period of time, in order to avoid taking a huge tax hit. Proprietors are not able to choose. If they have a very successful year, theyíre going to take a huge tax hit.

There so many benefits to incorporation, most businesses should incorporate their business as early on in their business as possible, in order to take full advantage of wealth accumulation and text minimization. Edmontons tax accountant says there many other benefits that are associated with incorporating the business. Those benefits include be able to decrease their personal liability in the business, by allowing the corporation to take on the liability. By incorporating, businesses can also protect their tradename, can help them qualify for financing, also gives the business a certain amount of legitimacy, and very simply some businesses are not able to be hired by businesses if they are not incorporated.

With all these reasons why itís beneficial for businesses to be incorporated, as owners should look at incorporating their business as soon as possible. The earlier, the better in order to be able to maximize their ability to accumulate wealth for themselves says Edmonton tax accountant.

Entrepreneurs who are not incorporated are not able to use the small business tax rate, and end up paying too much in taxes says Edmontons Tax Accountant. There are many benefits to incorporating, and the most: one is in order to take advantage of the small business tax rates in order to help accumulate wealth, and to be able to do so effective tax planning.

Currently the personal tax rate in Alberta at 48%, which is the highest marginalized tax rate. Meanwhile, the small business tax rate in Alberta is currently 11%. Business owners who want to take advantage of that lower tax rate can do so, as long as they are incorporated. Business owners can make up to $500,000 every year in order to continue making that tax rate is Edmontons tax accountant. The reason why this is beneficial says Edmonton tax accountant, is for several reasons. By paying lower taxes, business owners cannot only have more money available to them to invest, by utilizing that strategy every single year over several years, this can help the business owner invest quite a bit more money than they would have been able to if they were still being taxed at a higher tax rate.

Lower tax rate can also help business owners eliminate their debt quicker. This is extremely beneficial to entrepreneurs who professional businesses such as dentists, lawyers or doctors. They often start their practice with high amounts of debt says Edmontons tax accountant. By incorporating their business early, they will be able to use the small business tax rate in order to put more money into debt to production. If they waited longer to incorporate, those business professionals would have to be paying their debts for several more years before they would be able to incorporate their business.

Another reason why utilizing a lower tax rate is so beneficial to entrepreneurs says Edmonton tax accountant, is to make it easier for business owners to acquire assets in their business. Since assets are not expenses, itís much more beneficial for business owners to be incorporated in order to get assets. The reason is because they will pay less money in taxes, they have more money they can use to invest in those assets.

Unincorporated businesses also have to pay CPP in addition to tax. Many businesses are not aware that they have to pay additional amounts if they are not incorporated says Edmontons tax accountant. It works out to roughly 10% on the first $50,000 per year which works out to be $5000 per year that business owners are paying towards CPP. This is partially because business owners not only have to pay the employee portion of CPP but they also have to pay an employer portion every year.

These are just some of the benefits of incorporation in order to utilize the lower taxes that a small business tax rate can afford business says Edmonton tax accountant. If business owners would like more information, they can make an appointment with their accountant to discuss all of the benefits.