Part-time CFO | Accumulating Wealth Through Tax Strategies
Many entrepreneurs donít understand how significant the decision is on how they should pay themselves in their business says part-time CFO. The difference between salary and dividends in a corporation, is not only what is deductible from income and what isnít, but the taxes that are paid on each one is different. Because of this, the decision on how to take money out of the business boils down to a tax strategy. The best way that business owners can create a great strategy for their business, is by using a great accounting firm to create a great business plan for them.
Business owners are going to want to find the best part-time CFO that they can, because when entrepreneurs try to save money and accounting services, this usually end up getting services that end up costing them far more in additional taxes that had they budgeted for the more knowledgeable accountant in the first place. The reason why itís so important for entrepreneurs to have an efficient tax strategy, is because itís going to be able to allow them to save thousands of dollars every year in taxes, that they can then use towards accumulating wealth in their life, and increasing the cash flow in their business.
Many entrepreneurs werenít aware of the situation when they first started their business, and are often left wondering if they have the best text strategy possible. One way that business owners can check to see if potentially this is a problem, is by looking at their financial statement, or last yearís tax return. If it shows that they are getting paid either 100% in dividends or hundred percent in salary, that may be an indication that there tax strategy have enough thought process to it. The reason for this, is because the most efficient tax strategies usually have a combination of salary plus dividends.
Since this is the most asked question of part-time CFO, many business owners think that it should be a much easier question to answer, that this is not the case. So many different variables need to go into deciding this, that not only is it difficult to answer, but only professionals in this line of work are qualified to answer. If entrepreneurs find someone who answers the question to simply, or without completely understanding the business or the owner, chances are theyíre not going to completely understand the situation and therefore their advice isnít great.
The hiring the right part-time CFO, they can ask all the questions and find all of the information that they need in order to gain a complete understanding to come up with the great strategy. Business owners should be ready to answer questions about spouses, other income, children and childcare as well as questions about divorce and separation. As personal as these questions may be, itís extremely important for an accountant to completely understand all of them before they make a recommendation of how business owner should take money out of their corporation.
One of the more important decisions that a business owner can make in their business says part-time CFO, is how the business owner should start paying themselves. Why itís so important for business owners to declare salary or dividends when they take money out of the corporation is because while business owners have to take money out of their corporation, it needs to be done one of two ways. Business owners have to choose if they take money out of their corporation using salary or dividends. This question is important because when business owners take out salary, it is not deductible from the income of the corporation, and therefore personal taxes must be paid. Personal tax rate in Alberta tops out at 48%, and the average Albertan pays 43% in taxes. Ultimately, the answer to this question becomes a tax strategy issue. When business owners take out dividends, they are not deductible from businesses income, and they are a direct withdrawal of the prophets of the business. Therefore, dividends are taxed at 11% small business tax rate.
Many entrepreneurs think that since dividends are taxed at a much lower rate, but they should always take income out of their business through dividends. This is not necessarily true, because how much salary a business owner earns, and how much profits a business owner takes using dividends, can affect their overall tax rate, and how much they can pay themselves in the future. The answer to this question should be considered by someone whose career is making this decision like part-time CFO. This actually is the most common question that business owners asked chartered professional accountants. They should be wary of anyone who answers the question quickly, or who doesnít take the time to completely understand the business as well as the owner. Often, entrepreneurs try to save money when they first open their business by finding the most cost-effective accounting service, and while that may sound like a great strategy, business owners need to understand that if they hire a accountant based on price, they may get inefficient accounting services, Which can end up costing the entrepreneur far more in additional taxes that wouldíve cost the business owner and accounting services to hire a great accountant in the first place.
That entrepreneurs can ensure that they have a great part-time CFO to help them with this, is by contacting Spurrell and Associates. Through their several years of creating tax strategies for customers, they have created a formalized process. This process allows accountants to get as much information as possible from their clients, without missing any important questions. They also the process is devoted to analysing that information efficiently in order to create great tax strategies and a great cost. Business owners who utilize spiral Associates can be assured that will get a great business plan with a great strategy on how they can save taxes so that they can accumulate wealth in their business and personally.