Part-time CFO | How Can Tax Strategies Impact The Business
An extremely common question that many business owners ask their part-time CFO is how they should pay themselves in their business. This is one of the most common questions because the answer to it is extremely complex. The decision of how to pay themselves, either through salary, dividends, or combination of both, is actually a complex tax strategy that can help business owners save thousands of dollars a year. Best practices when it comes to this, is to utilize a professional that can help them create a business plan that they can use as a roadmap on how they can save money.
The amount of variables that must be considered in order to make this decision is complex. Anyone who gives a simplistic answer to this question, or who doesnít take in-depth notes on the situation of the business owner and their corporation situation, is not prepared enough to answer this question. Business owners should have a specific mix of dividends and salary to take out of their business, based on their specific set of circumstances. Many variables must be discussed including other income, spouses, childcare expenses and divorce or separation just to name a few on the personal side of things. Many business circumstances must also be discussed by part time CFO as well including future or past losses, independent contractors, what type of corporation they own, and if they are planning on moving.
Since there is a huge amount of information that must be dealt with, business owners should find the best part-time CFO that they can in order to properly go through this information. The chartered professional accountants at Spurrell and Associates have a unique process to determining the answer to this question. Theyíve developed over there since many years of tax strategies, a formalized process of gathering as much information from their clients as possible. This formalized process means that the can get as much information as they can as efficiently as possible. They also have processes on how to go through that information efficiently in order to come up with tax strategies a lot easier than many other accountants. This means that business owners can come away with great tax strategies, knowing that all important information has been considered.
Once they have the most efficient tax strategy possible, and business owners know exactly how theyíre going to pay themselves in the future, they can be assured that theyíre going to be saving thousands of dollars in taxes each year, that can then go towards increasing the cash flow in their business. Since 29% of all failed businesses say that the reason why they failed was because they ran out of money in their business, this can significantly impact businesses and their ability to remain open for years to come. Business owners should ensure they part the right part-time CFO for the job, when thatís going to consider all of their circumstances, and that will help them set their business up for success.
Many entrepreneurs donít know why they have to declare salary or dividends taking money out of their corporation says part time CFO. Since business owners have to take money out of their corporation, needs to be done either a salary, dividends or a mixture of the two. But what they might not understand, is that the decision on how they do it, can be a powerful tax strategy on how they can save significant amounts of taxes.
Itís important for entrepreneurs to know that the personal tax rate in Alberta tops out at 48%, while the small business tax rate is currently at 11%. Business owners can utilize these rates by taking money out of their business efficiently through dividends and salary how they decide to do it, is a much more complex issue says part-time CFO. Many variables must be taken into consideration when coming up with the answer to this question. Since the most effective tax strategy usually ends up being a combination of dividends and salary, but that combination ends up being, is dependent on a certain set of circumstances.
Business owners should look for the best part-time CFO that they can, keeping in mind that if entrepreneurs try to save money while hiring accounting services, they usually end up paying far more in increase taxes than they would on great accounting services. Since this is potentially one of the most important decisions their business can make, they need to be able to look for the right professional that will be able to help them out significantly.
There are many personal circumstances and many business circumstances that accountants must ask about and understand in order to determine what combination makes most sense to each entrepreneur. Business owners should get ready to answer questions about other income they may have, their spouse and their spouses income, children, divorce or separation agreements, and the businesses of their family members. All of these informationís can factor in greatly this decision, and how they can help entrepreneurs save taxes.
Part-time CFO is also going to be able to ask business owners about if the business is moving, if they lost money in the past or stand to lose money in the future, if they have independent contractors, and what their employee situation looks like. Many factors are going to go into this decision, that business owners should be very wary of any accountants that give the answer very simplistically, or give the answer without taking the time to fully understand the business owner and their corporation.
By coming up with an extremely efficient tax strategy, business owners can greatly impact their business, and the cash flow in their business. Since half of all entrepreneurs close their business within five years, and 29% of those businesses say that the reason why they closed was because they ran out of money, and efficient tax strategy that can help entrepreneurs increase their cash flow can make a significant impact in businesses for the better.