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E-Myth – “Why most small businesses don’t work & what to do about it”

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Vancouver Accounting Firm | Top Reasons for Small Businesses to Incorporate

When entrepreneurs start out, and operate out of their home says Vancouver accounting firm. They often start off as will proprietors, and do not think about changing that until they are told by their accountant much later. That they should be incorporating to save taxes.

Often, many business owners do not know the difference between sole proprietorships, or incorporation. Or what they do know with their limited knowledge. Is that is going to force them to find an accountant, and pay for corporate year end. And it will cost them more money than they make.

However, these assumptions are not necessarily true. Because while it will cause them to have different sporting requirements. It does not have to be expensive, or difficult.

As sole proprietors, business owners will be able to pay their business taxes with their personal taxes. Simply by filling out additional form, and submitting it along with their personal tax return. In order to accommodate businesses, Canada revenue agency gives an additional forty-five days.

With June 15 being the filing deadline for sole proprietors. And so the taxes can be very easy, requiring entrepreneurs to only do single ended accounting, and fill out a form.

And once entrepreneurs incorporate, they Vancouver accounting firm says they do need to complete a corporate year end. But rather than being very expensive and complicated. It actually can be as easy as handing their accountant twelve bank statements.

And then showing up to a meeting to review the year-end. And work on some tax planning, for the future year. Therefore, it does not need to be complicated, or expensive.

And actually, the taxes that they save, will usually pay for any cost associated with incorporation. Allowing entrepreneurs to end up for their head financially. Once they incorporate, even if they are very small business.

With the top personal tax rate in British Columbia being fifty-three point 5%. If their personal taxes, along with their business revenue puts them in that tax bracket. Over half of what they make in their business will go to taxes.

And even if they are not at the highest personal tax rate. They will be paying significantly more taxes, then if they incorporated their business. Because the corporate tax rate across Canada is only 11%.

Therefore, business owners only have to be making fifty thousand dollars a year in revenue in their business. Before they pay themselves. In order to come out farther ahead financially by incorporating. And paying an accountant to do their year end.

Than they were if they stayed as a sole proprietor, paying higher taxes. But having a much more simple year end. However, what businesses should also keep in mind according to their Vancouver accounting firm. Is that the better financial information they get from their accountant.

Will give them the ability to make more informed financial decisions. Which will help them run their business, and avoid making decisions that could be very costly their business. This is why all entrepreneurs should talk to their accountant about why they should incorporate their business.

Often, business owners start their business by running it out of their home says Vancouver accounting firm. And do not even think about incorporating, even as they grow.

Not only will these business owners end up paying significantly more taxes than they ever need to. They also may be causing additional detriment to their business. Which is why they should find out early on in their business ownership. Why incorporation is the right decision for them.

One of the first things that business owners need to understand. Is that running a business, no matter what they do carries inherent risks. Some businesses have a higher risk, such as electricians, or plumbers.

While other businesses have a very low risk, such as a web designer, or a graphic designer. But no matter how higher low their risk actually is. There is an inherent risk to operating a business. And even if an entrepreneur gets in it car to drive to a clients office.

They run the risk of being sued. And if they are a sole proprietor, they Vancouver accounting firm says their assets are at risk. The reason why, is because if they get sued as a sole proprietor, they get sued personally. And if they own assets such as the home that they live in.

Or assets like savings, vehicles, or other properties, such as a rental property or vacation home. These assets are also at risk. By incorporating their business however. The corporation shoulders the liability itself.

And so if the company gets sued, it is the corporate entity that gets sued, and not the business owner or directors of the company. While this does not completely eliminate the risk for business owners. It diminishes it significantly.

Which is why one of the first things that Vancouver accounting firm will share with their business owners. Is if they want to minimize the risk of having their assets affected if they get sued. They should incorporate their business sooner rather than later.

Another benefit of incorporation, is that they are going to be able to legally protect the tradename that they are using. And although many business owners owe go to corporate registries, to register their tradename. Registering it does not give them legal protection over it.

That means that if they register their tradename, another company can come along take the name. And incorporate themselves using that name. And then they own the legal rights to it.

Because of that, entrepreneurs who want to protect the name that they are spending a significant amount of time building. They should incorporate their business early. Which will help them legally protect their tradename. So that the brand that they are building can legally be theirs.

There are many more benefits of incorporation. And if entrepreneurs want to hear more benefits, especially as they relate directly to their business. They should set up a meeting with they Vancouver accounting firm. The first consultation is free. And will allow them to get the information they need, to make the right decision to help them grow their business.