Vancouver Accounting Firm | Main Reasons to Incorporate
Often, Vancouver accounting firm speaks with clients. Who are business owners, but are not aware of the benefits of incorporating. And have been operating their business for several months, or several years without giving this a second thought.
However, business owners who may be operating their business as a sole proprietor, also known as an unincorporated business. Maybe missing out not only on tax savings that they could be enjoying.
Entrepreneurs in Canada may also be missing out on many of the other secondary benefits that incorporation offers. And they may be doing a disservice to their business. And not even realize it.
Even when Canadian business owners are struggling. They do not ask the right authorities for help. As this was discovered by into it, who is the software company that makes the accounting software QuickBooks. And they did a survey, in order to find out. How many small business owners in Canada. Actually sought out professional help. From bookkeepers and accountants, when they ran into administrative problems with their business.
What Intuit discovered, was the shocking results. That only 11% of all Canadian business owners who were struggling. Ever sought out help, from the people who could help their business succeed. Which means more Canadian entrepreneurs are struggling, then actually need to.
This is why, when Vancouver accounting firm meets with clients for the first time. They like to share the benefits of incorporating, so that small business owners, especially if they are sole proprietors or unincorporated. Can make the decision, about if the timing is right to incorporate.
And they may find out that they are going to save significant amounts of money. Or, they may find that the benefits of incorporation are so beneficial, that they do not actually care how much money they are going to save. Because the secondary benefits of incorporation. Are going to help their business succeed.
The first reason why entrepreneurs are going to benefit from incorporating their business. Aside from the massive tax savings they are going to enjoy. Is that they are going to get allowed onto far more job sites. When they are incorporated, than they ever would have as a sole proprietor.
In fact, Vancouver accounting firm confirms that entrepreneurs are going to be allowed onto many more job sites. Because many companies will not hire contractors that are not incorporated. Simply because they are a payroll tax risk. If Canada revenue agency deems them an employee.
And as a small business owner, entrepreneurs should be concerned with being able to accept as many jobs as possible. And as a sole proprietor, are completely limiting themselves. By ensuring that they are not going to be able to bid on certain jobs. Simply due to the fact that they are running a sole proprietor business. Instead of an incorporation.
Therefore, business owners who want to be able to get on as many jobsites as possible. Should seek help from their accountant, to find out what they need to do to incorporate their business immediately.
Often, when people start a business for the first time, Vancouver accounting firm says they are starting it out of their home. They may not even consider incorporating their business. And are completely unaware that they are paying significantly more taxes then they could be.
Often, people do not think of incorporating until they move their business out of their home. But by then, it is extremely likely confirming Vancouver accounting firm. That they have already paid far more in taxes than they should.
And the reason for that is because businesses that are sole proprietors. Have to pay the personal tax rate on their business income. And depending on what tax bracket the business owners are in. They will have to add their business income to the amount of money that they make per year.
And pay taxes on their business income, whatever personal tax rate they are currently having to pay. Often, Vancouver accounting firm says the business income itself will push them into a higher tax bracket. And not only will they be paying more taxes on their business income. They will also be paying higher taxes on their personal income as well.
The highest personal tax rate in British Columbia currently is fifty-three point 5%. So business owners are at the top tax bracket. And have to pay the highest personal tax rate, their business income will be taxed at more than 50%. Which means the majority of the income that they earned as a business owner. Will go to Canada revenue agency.
However, the moment they incorporate with their Vancouver accounting firm. They will start to enjoy an extremely low 11% tax rate. That all corporations throughout Canada get to enjoy. Therefore, simply by incorporating. Small business owners in British Columbia can start saving over 40% in taxes.
This is especially beneficial if entrepreneurs got into business to accumulate wealth. Whether they want to accumulate wealth for their own retirement, to give to their children, or perhaps to buy a house or go on vacation. There are many reasons why entrepreneurs want to make more money than they were making as an employee. And they are going to be able to achieve those goals much quicker. If they decide to incorporate their business faster.
Also, if entrepreneurs are ever going to need to purchase equipment to help them run their business. Or to help them grow their business. If they incorporate, and start paying less taxes immediately. They are going to be able to save up money for that asset a lot faster. Then if they were continuing to pay more than half of what they earn in their business to the government.
And while many business owners are not sure if their business is large enough to benefit from the lower tax rates. Vancouver accounting firm says they would have to make a very low amount of money. In order to financially benefit from incorporating. But they also need to realize that there are many secondary benefits of incorporation. So if they truly want to find out how they can benefit, they should set up an appointment with their accountant now.