Vancouver Accountant | Common Questions About Incorporating
While many business owners have heard that they should incorporate their business says Vancouver accountant. Business owners often also hear that it is an expense that they do not need early on in their business. Especially when they are small, and trying to save money.
In fact, there are so many pieces of information about incorporation. This can be very difficult for business owner to understand what the right decision is for their business. Which is why it is important that they understand the answer to some of the most common questions about incorporation.
One of the first questions that Vancouver accountant gets that are considering incorporating their business. Is what is another term for unincorporated businesses, and how to that file taxes?
For business that is not incorporated, this is called a sole proprietorship. In the way they file taxes is alongside their personal taxes. Because there filing taxes their personal taxes. The business income gets taxed at the personal tax rate. Which in British Columbia, tops out at fifty-three point 5%.
Another question that businesses have about incorporation. Is: what is the main advantage for unincorporated businesses? While there are not a lot of advantages, the only real advantage is that it is simpler, and therefore cheaper to do the year-end.
Corporations needs to have a corporate year-end done, which acquires something called double ended accounting. The preparation of T4 and T5 slips. And monthly preparation of financial statements called balance sheets and income statements.
However, sole proprietorships have no need for such a complex year end. They can use single ended accounting. And filling out a simple form in order to file their taxes. Which can be easier, and therefore less expensive for business owner to do.
The third question that business owners often ask. When considering whether they should incorporate their business or not. Is that what profit level do the tax benefits of incorporating normally outweigh the costs?
Any business owners make the assumption that in order to benefit tax wise from incorporation. They need to be an extremely large company, yielding half-million or million dollars in profit each year. This is simply not the case.
In fact, Vancouver accountant did the calculations themselves, and found that even small businesses benefited financially. From the tax benefits of incorporation. For businesses to benefit financially, they only have to make fifty thousand dollars a year in income.
This means that even before business owner pays themselves, if they have invoiced at least fifty thousand dollars a year on average in their business. They can benefit from incorporating.
And even if they are factoring the costs of paying an accountant to do the complex year ends. Business owners that incorporate will end up farther ahead financially. Then if they did not incorporate their business at all.
However, business owners still might have more questions about whether they should incorporate their business or not. And for these business owners, they should set up a consultation with their Vancouver accountant. And find out what the answer to their questions are for their unique circumstances.
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Even though many business owners make the assumption that the decision to incorporate is a financial one says Vancouver accountant. There are many other benefits that business owners can enjoy by incorporating. However, until they know the answers to these questions, they will not understand what those benefits are.
The first things that business owners want to know, when they are considering incorporating. Is how does incorporating help protect their personal assets? The reason why, is because it gives a business owner is limited liability.
Even very low risk businesses all carry an inherent risk of being sued while conducting their business. And if a business owner gets sued while conducting their business. If they are not incorporated, it is the business owner themselves and their assets that are at risk.
However, incorporating means that the corporation holds that liability. Which means if the business gets sued, the business owner and other directors of the corporation are sheltered to a certain extent. Which can protect any personal assets that they have. Including the home that they are living in.
Because of that, if business owners have assets, they might want to consider incorporating their business. So that they can minimize the risk themselves if they get sued.
Another question that business owners often have when they are deciding whether to incorporate or not. Is: does registering a tradename offer the same protection as incorporating?
This is one assumption that many business owners to get wrong. Because they think that registering their tradename at corporate registries office. Offers them the same legal protection as incorporating. However this is unfortunately not the case.
Registering a tradename is simply creating a placeholder for that name. But it will not to stop anyone from using the name. And cannot stop anyone from incorporating using that name. And since whoever incorporates a company using that name will have legal rights to that name.
Business owners who want to protect the name that they have been using him and the business and brand that they have been building. Should consider incorporating their business sooner rather than later. So that they can have access to their name legally.
business owners also want to know the answer to the question: Will Banks issue business loans to unincorporated businesses, or so proprietors? Unfortunately, it is extremely rare that banks are any financial institution at all Issue loans to sole proprietors.
In fact, Vancouver accountant says in their entire history they have never seen it happen. Therefore, if business owners are ever thinking that they may potentially need a loan in the future.
Whether it is to buy a building, make leaseholder improvements. Or if they may need to purchase an asset to help them grow their business. Incorporating sooner can help business owners secure that loan. And keep that from being a barrier to why they cannot have access to the funds they need to grow.
There are even more benefits of incorporation then what is listed here. And if any business owners want more information about incorporation. Or they have questions specifically about their business, they should contact their Vancouver accountant to get all of the questions answered.