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Outsourced Accounting Services | How To Effectively Operate A Proprietorship

There is many reasons why an entrepreneur might decide to operate a proprietorship over a corporation says outsourced accounting services. However, one mistake that entrepreneurs should avoid making is operating a proprietorship simply because they did not make the decision on which was most efficient for them to run. There are many benefits that an entrepreneur might see in incorporating their business such as having limited liability and reducing their risk of being sued, being able to get a WCB number, owning their tradename as well as increasing the legitimacy of their business. All these are secondary to the tax benefits that corporations enjoy. However, incorporating is not necessarily the right decision for all businesses, and entrepreneurs should be aware of that before they make their decision.

In order for a business owner to be able to make the right decision, they should understand what the legal differences between a proprietorship and a corporation is. Outsourced accounting services says that a proprietorship is a business that is legally tied to the business owner and their personal tax obligations. On the other hand, a corporation is a separate legal entity that is created specifically for tax purposes.

One of the things that an entrepreneur should keep in mind should they decide to operate a proprietorship, is that they have the risk of being sued in their business. This is even if they only run their business part-time. Not only does this mean they can get sued personally but it actually puts all of their personal effects at risk as well all of their assets including their house, their car and their personal savings could potentially end up being taken away if they get sued and lose in court. If entrepreneurs are making the decision not to incorporate, because they think it is too expensive, they might want to consider the cost of legally protecting not only them, but their family through protecting their home.

Another benefit that entrepreneurs get while incorporating, is a tax benefits. The taxes that an entrepreneur pays as unincorporated business is 11%. However, the taxes that a business owner pays if they operate a proprietorship is whatever the tax bracket is for the amount of money they bring in. the highest personal tax rate in Alberta is currently 48%, while the average Canadian pays 43% of their entire income in taxes. When proprietors do not incorporates, they can pay up to 48% in taxes. Even if an entrepreneur is making significantly less in the business, but more in their day job, that could bump them up in the combined total to make them pay the highest personal tax rate.

When entrepreneurs are making the decision to operate a business, rather than making a decision through indecision says outsourced accounting services, they should ensure that they are making the decision that is right for them, their family and their business. There is nothing wrong with operating proprietorships, as long as an entrepreneur knows all of the facts associated with it.

Outsourced Accounting Services | How To Effectively Operate A Proprietorship

There is absolutely nothing wrong with owning a proprietorship, as long as an entrepreneur knows all of the benefits and risks says outsourced accounting services. If an entrepreneur learns all of the different benefits and costs associated with both proprietorships and incorporations, and decide that a proprietorship is the right decision for them, they should keep several things in mind to ensure that they are filing taxes properly and on time, keeping their accounting organized, and ensuring that they are getting the professional help they need to succeed as business owners.

One of the most important things for entrepreneurs to understand when they are owning a proprietorship, is that they have a different tax filing deadline then everybody else. This means that entrepreneurs with proprietorships can take until June 15 to file their taxes which is forty-five days longer. Not only that, but the business owner can also personally Faller taxes at the same time, meaning they do not have to file personal taxes on April 30 and then there proprietorship taxes on June 15 they can file the entire thing later Says outsourced accounting services. Although business owners with proprietorships are filing alongside their personal tax return, they need to file a separate form. Rather than a T4 or T5, entrepreneurs need to fill out a form called the T2125.

Another benefit to running a proprietorship over unincorporated business is that they do not need any special accounting software to run their accounting. Accounting software like QuickBooks, Sage or zero can end up costing a business owner more time to figure out and use as well as more money and it is not actually needed. Outsourced accounting services says that one of the biggest reasons why it is not needed, is because entrepreneurs with proprietorships only need to worry about single entry accounting. Corporations need double entry accounting which is a lot more thorough but a lot more time consuming and requires the accounting software. In order for an entrepreneur with a proprietorship to keep track of their accounting, all they actually need is to keep track of all of their revenue categories and expense categories on a spreadsheet.

One recommendation that outsourced accounting services has for entrepreneurs of proprietorships is that they should actually visit an accountant in order to find out what categories they should be tracking because the software that corporations use will prompt entrepreneurs with what they need to track, but if a business owner is using a spreadsheet, they should get a second opinion. Also, depending on what business it is some expense and revenue categories may be more important or less important.

Operating proprietorship is something that can be the right decision for many entrepreneurs, but they should get all of the facts associated with not only the differences between proprietorships and corporations, but what to do in order to ensure their meeting all tax requirements. Once they do this, entrepreneurs can ensure that they are doing the rest to minimize risks and ensure accuracy of their finances.