Incorporation Doesn’t Have To Be Hard | Edmonton Accountant
How long does it take to incorporate, um, one business day?
Yeah, I can see why. Cause it’s mad.
Hi. Thanks for joining us for another episode of ask spurl CPA today they were talking about how incorporation doesn’t have to be hard. I have Trevor here with me again here today. So Trevor, um, you know, it’s the Easter Monday and it’s just us in the office today. Yeah, it’s nice. The next thing quiet. Edmonton Accountant, it’s a good time to get focused work done and those tasks that, you know, otherwise we’d be fighting with, uh, you know, space time and other people in the office and I could just settle in and focusing on those KPIs that we, we are trying to accomplish and get done for our businesses. So the court that we have here today, we’re going to go way back. We’re gonna to do a Confucius. Cool. Okay. Oh Wow. Life is really simple, but we insist on making it complicated. Um, and the system, the statistic is intuit, the makers equip books.
They’ll say only 11% of business owners will actually seek professional help. And the story that we have here, we don’t, we’re talking about incorporation doesn’t have to be hard for business owners. They think that incorporation that is either going to be too much work, therefore, you know, they just, they just don’t incorporate, they continue to operate as an unincorporated business. They miss out on, oh, all the benefits of incorporation a introvert. What are the questions that these business owners that, what are the questions that they should be asking? Uh, so number one question is what does the top personal tax rate for small business taxes in Alberta? So the, the top personal rate, you know, the top person, right? And different from the small business rate, the top personal rate is 48%. Now, as opposed to the small business tax rate is 11%. So we’re talking about almost half.
You know, you make a dollar, you pay 50 cents, so you’re 48 cents a that’s going out as opposed to 11 cents on the dollar on the small business tax rate in Alberta, which is fantastic. We have one rate that is absolutely terrible and we have another that is fantastic. Edmonton Accountant, and you know, we have to do what we can to, to access that rate. Yeah, no kidding. So what does that mean? If you’re trying to accumulate wealth? Yeah. So put this in perspective, we’re a business owner. They have an extra thousand dollars and they want to use that extra thousand dollars to be increased wealth to fund retirement. And if they’re operating as from private ship in the talk top marginal rate, you know, they’re going to have $480 of that thousand dollars go out towards tax. They’re going to have $520 of which to invest. That same business owner who wants to accumulate wealth in the corporation can pay $110 in tax, 11% on that thousand and then they’re going to have $890 to invest.
So that corporate corporate owner has $890 to invest as opposed to the unincorporated business owner. They have $520 to invest that $890 to invest as good and grill far quicker, far faster than that $520. And they’re going to the incorporated business owners just going to get rich a lot quicker. Uh, which is, you know, recently why the, the uh, you know, the federal government looked at that rate and you know, thought about clawing it down, but they backed off once they saw the, the uh, you know, how treads the small business community had that grade. Yeah. So what does that mean if you’re trying to buy equipment for your business? Yeah, it’s the same thing. People think, okay, I’m buying equipment so that doesn’t apply to me. I want to buy a truck, I want to buy a welding machine, I want to buy an x ray machine.
Edmonton Accountant, you know, that doesn’t matter. That’s a business expense. That’s not an expense. That’s an acid purchase. So in order to purchase an asset, we have to make money. We have to pay tax on that money and then what’s leftover after we pay tax, now we can buy that equipment that we want. So that same business owner has $1,000 to buy equipment. If they’re not incorporated, you know, they could have paid as much as $480 out and they only have $520 left to buy equipment or you know, if they’re incorporated $1,000, you know, that they made in profit, they want to buy new equipment. Now they pay 11% tax, they have $890 to buy new equipment. So the incorporated business owner is going to be able to get that equipment that they need to drive their business forward quicker because there’s some, depending less tax on those corporate profits.
That makes a whole lot of sense to me. So now if you don’t incorporate, does the risk of being sued personally increase? Yeah. So not only are, you know, you’re paying more tax, you know, your, your risk of taking on a, uh, you know, personal liability increases. Edmonton Accountant, so it, it’s uh, it’s not absolute if you’re not incorporated, you know, if you’re incorporated, it’s not that you can’t be sued, it’s just your risk significantly lower. And I mean significantly lower of being sued personally. So you know, you’re paying more tax and also you’re always, every time you go and do a job, you know, you’re at risk of being sued personally of your personal house on the line, your car, your, your personal savings on the line with every project that you do. Wow. So now if you don’t incorporate, will some people not hire you?
Yeah, some people will just say it’s a legitimacy concerns. Some people will just like, oh, this person’s not incorporated. They must be, you know, a fly by night company and other, other companies, they came to more sophisticated views saying that if you’re not incorporated, there’s a risk. And rightfully so, there’s a risk of you being deemed their employee and they don’t want that hassle. You know, if you tried to go get a welding inspector con contract and a Sun Corp site and you’re not incorporated, they’re just going to send you home. Because the accountants, the Suncor are really smart and they know that if you’re not incorporated, there’s a risk you being deemed their employee both for tax purposes, uh, and for employment of law purposes. So they don’t want anything to do with that. So lots of times they won’t hire you. Right. So now if you don’t incorporate, do you have the same legal right to your trade name?
Yeah. Some people don’t realize because you can go to corporate registries, you plunk down your $50 when you register a trade name and people think you own that is there’s a, it’s like a placeholder. You know, if someone comes along and incorporates under that name after the fact, they have a bigger legal right to it, then the person, uh, who simply registered the trade name, um, previously. Edmonton Accountant, so if you want to protect a trade name, you should be incorporating that train here. Hmm. So now if you don’t incorporate, could getting WCB coverage be a problem? Yeah, there’s the, you know, the other loop is, is, you know, you’re not going to get the WCB coverage that she need. So WCB likes to, uh, they like to ensure what they call the prime contractor because they don’t want to be administered, you know, thousands and thousands of WCB accounts.
So if you’re going out and working on a site and there’s a general contractor and that general contractor has a WCB number, can you come in as a subcontract and you call up WCB and say, Hey, I want a WCB number. I’m not incorporated. They’re going to say no, we don’t want to give you a WCB number because you are not the prime contractor on that site. And then the prime contractor is going to turn around and say, hey, you don’t want a WSUV number, we’re not going to hire you. So you get caught in this catch 22. And the way out of it is to actually incorporate, cause it’d be incorporate WCB, you know, doesn’t discern any more if you’re the prime contractor and not that you’re just eligible for getting a GST number, uh, because you’re incorporating this, their administrative policy. Okay. So how long does it take to incorporate, Edmonton Accountant, one business day?
A lot of people think that has a huge dramatic drawn out process. Um, you know, we literally meet with clients sometimes and we have an initial meeting and within one business day, uh, sometimes the same business day. Edmonton Accountant, we have them incorporated and it can be a little bit different for medical doctors or lawyers. Uh, when we incorporate those professionals, we need a, um, basically a stamp of approval from their governing body, which can take a couple of weeks. But you know, for your average contractor, your average small business that doesn’t have a, uh, a professional governing body, I, you know, we’re incorporated within a day. Sibley, pick a name, pick another one. If you don’t like that one, uh, it’s a very quick process and that’s a really awesome vaults. Or the clients that come through our farm is, hey, tell us what name you want a, we’ll have that corporation set up for you in a day.
Um, really how it works. So now does a solo preneur need accounting software? Just because they incorporated [inaudible] you didn’t need accounting software before you are incorporated. You’re not going to need accounting software after you’re incorporated. You know, that’s something your accountant can look after. Your people think that just because you’re incorporated, uh, you’ll sudden that your accounting is going to become more complex. Um, you know, that’s really not the case. There are better ways to do it. The people don’t incorporate for that very reason. They think the accounting is going to be more complex, but you absolutely do not need that just because you’re incorporated, you know, you, you either need it based on the business by itself. Generally most people need accounting software when they have arms length, the employees. But if they’re a solo preneur, they’re not going to need accounting software. You know, before incorporation or after corporation, if there’s still that solar printer, you know, all the people working in the business are under one roof, one family.
Right. So now can the process of making tax payments be simplified with planning? Yeah, so the, the process of making tax payments can be simplified with planning as well. So, you know, a lot of people won’t incorporate because you know, they recognize that when you’re not incorporated, you have your personal tax account and once you’re incorporated, especially not burglary of a federal and a corporate tax account or a sort of federal and provincial tax account and you’ll also have a payroll account, Edmonton Accountant, because now you become an employee of this corporation and you’ll have a GST account, which you may or may not eat just proprietor anyways. So a lot of you know, families are going from one tax account, um, you know, four or five tax accounts all of a sudden. And, and sometimes that’s the reason why they don’t incorporate, but you know, if we can normally reasonably project what that income is going to be, we can agree on what a melts you’re going to take out in the business every year.
And we could simplify that and we just give the business owner as a schedule of what they need to pay into each one of those tax accounts every month. And they simply write a bunch of post dated checks once a year. We hand them into the government as they become due. And to the business owner, it’s like nothing has changed at all. Edmonton Accountant, you know, it’s, it’s, it’s really just as easy as, you know, most business owners, they get a corporate bank account that you get a corporate credit card, they send in at the end of the year, they send them the 12 core based statements, the 12 corporate credit card statements and we assembled the corporate year end for them. And really they should be having that corporate account anyways where the proprietor not and offers them a degree of audit protection. Um, but you know, that’s really all I need.
So, you know, business owners who are missing out on all these advantages of incorporation often don’t realize that a, it can be done quickly be, it’s not going to change anything. Edmonton Accountant, they can get all of their tax payments done in a schedule right out all their tax payments once a year. They’ll keep current on their tax. Ha, literally hand in 12 statements, get all your income and expenses flowing through one account, handling those 12 statements at the end of the year, the account, and you keep conducting business as you’ve done in the past. Uh, but simply you get access to all of those tax savings and other, you know, secondary benefits of being incorporation, uh, very painlessly. Uh, so I think that’s what we have here today. Thanks much for joining us. Again, as always, please hit the like and subscribe button so that you deliver you tips on how to beat the odds and business. And we look forward to seeing your comments below. So weekend, uh, uh, respond back and you know, potentially even address your, your comments as future videos. Thanks very much.