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The biggest question that entrepreneurs often have is what is the difference between a proprietorship and corporations? Outsourced accounting services says that the biggest difference is that a corporation is it is own legal entity, and its separate from the business owner. The proprietorship the other hand is an unincorporated business that remains attached to the business owner and the business owners tax obligations. Because the corporation is a separate entity, it has a corporate tax deadline, that is chosen by the entrepreneur at the time of incorporating the business. The proprietorship will have the same filing deadline as the entrepreneurs personal tax return.
The next question that entrepreneurs often have is should they consider the benefits of limited liability? Business owners really should consider the legal risks of owning a proprietorship as well as consider the benefits of incorporating their business. Outsourced accounting services says that business owners should consider if they can get sued for their part-time business. That is to this question is yes, and that does not just mean that they are personally at risk, if they own their house, that is at risk as well as their vehicle and personal savings as well. Businesses that are proprietorships have this risk, but incorporating can put a significant amount of that risk onto the corporation instead of the business owner.
Another thing that a business owner should take into consideration when looking at proprietorships versus corporations, is are proprietors normally tax efficient with more than fifty thousand dollars in income? The answer to this question is no, once proprietorship reaches fifty thousand dollars in income in the year, they will pay more in taxes than they would pay to incorporates, and get all of the accounting done for their business. Simply put, continuing to be a proprietor after earning more than fifty thousand dollars in the year is more expensive than incorporating. In addition to that, there are other secondary benefits of incorporating including protecting the businesses tradename, being able to get a WCB number for the business, and creating a certain amount of legitimacy for the business.
Entrepreneurs should and think that incorporating is the only option for them, but if they decide to run a proprietorship, they should be aware of the differences in structure, as well as the accounting and tax filing differences. If after hearing about all of the benefits of incorporating, an entrepreneur has made the informed decision that running a proprietorship is the right decision for them, they should proceed, knowing that they have to do for taxes and accounting, so that it can be done properly.
When business owners start their business, outsourced accounting services says that they often do not know how successful are going to be, and often do not start out running their business full-time, so they do not even think of incorporating as an option for them. However, business owners should understand the differences between proprietorships and corporations, so that they can ensure their setting up their accounting and taxes correctly, since both business structures have very different requirements.
There are several questions that business owners should take into consideration when they are operating a business, that can help them decide which business structure is best for them, and what they need to do in their business to ensure that their accounting and taxes done properly. The first question is are the tax filings for proprietorships done alongside the personal tax returns? Outsourced accounting services says that the answer to this question is yes, because proprietorship is tied to the business owner as well as the business owners tax obligations. This means that an entrepreneur will file their business taxes at the same time as their personal taxes.
The next question that business owners should take into consideration, is do unincorporated business owners have the same tax deadline as everyone else? Although the filing deadline in Canada for personal taxes is April 30, business owners of proprietorships have until June 15 to file their business and personal tax return. This additional forty-five days is to help owners of proprietorships prepare their tax filing because of the additional time needed to fill out the form properly. Business owners just need to realize that even though they have a later filing deadline, if they owe taxes, CRA will start charging interest as of the April 30 deadline.
The next thing that entrepreneurs should consider when operating a business, is do they need accounting software to run a proprietorship? Outsourced accounting services says that this is not actually necessary for businesses and can actually end up costing an entrepreneur time and money. Entrepreneurs of proprietorships can actually keep track of various revenue categories on spreadsheet software as well as expenses in their business. Buying accounting software like QuickBooks can be an expense that the business can do without, and trying to learn that software that is not necessary can cost them precious time.
By understanding the differences between proprietorships and corporations can help entrepreneurs ensure their doing the right things in their business, so that they are keeping as accurate track of things as possible, and filing accurately and on time. By avoiding these common mistakes, entrepreneurs are able to ensure there keeping their business on track and as places they can to have their business grow. The hope is that an entrepreneur would be able to grow their proprietorship so large that they need to incorporate their business. Being organized can help them do that, then help ensure the accuracy of their accounting they make the switch.
