Vancouver Accounting Firm | What Does Incorporation Do
While many business owners realize that incorporation will be necessary down the road says Vancouver accounting firm. They are sure why they should incorporate when they are new in business.
And often have the misconception that it is going to be too much work, and also expensive. And end up missing out on the benefits that incorporation can bring their business.
This is why whenever a new business as a meeting with their best to share with them all the benefits that incorporation has. So that young entrepreneurs can make the most informed decision. About whether they should incorporate sooner or later.
One of the first things that business owners should take into consideration. Is that as a sole proprietor, if they get sued in business. If they have assets, such as home, equals or even savings. Those assets will be at risk if they get sued.
And while this makes sense for his this is such as contractors. Who do electrical or plumbing work. Even very low risk businesses, such as graphic designers or web designers. Need to understand how important this is.
Because even low risk businesses do carry an inherent risk of being sued. And if they get sued while running their sole proprietorship. They could risk having their assets affected. Including the home that they and their family lives in.
Once a business incorporates however. It limits the liability to the business owner. Allowing the corporation as an entity to shoulder the risk, and the liability. Which means the company itself gets sued, and makes it much more difficult for the entrepreneur or any directors of their corporation to be affected.
Another benefit of incorporation or it is the fact that it will help protect the tradename that they are operating under. And while many entrepreneurs believe that by registering their name. That is legally protected, but that is unfortunately not the case.
And simply registering their name, acts as a placeholder. But will not prevent other businesses from taking that name, and incorporating it. And then owning the legal rights to the name.
Therefore, they Vancouver accounting firm recommends entrepreneurs incorporates. To protect the name they are spending considerable amount of time creating, and building. When they grow their business.
Another great reason why business owners should incorporate. Is because they may not get hired onto certain job sites as a sole proprietor. Because companies run the risk of having sole proprietors who work on their job sites be deemed their employees by Canada revenue agency.
And when that is the case, the companies that hire those sole proprietors. Will have to pay all of the payroll source sections that they would have owed that person if they were an employee. Dating back to the first day that they were hired.
So when they are looking to hire contractors to work on their job sites. They often only hire incorporated contractors. To completely minimize their risk of owing Canada revenue agency additional taxes says Vancouver Accounting firm.
Which means the moment an independent contractor incorporates. They will be eligible to be hired on many more job sites. It will help them be able to grow their business faster. Because they are not limited what contracts they can take.
Even though the benefits of incorporation are significant and many says Vancouver accounting firm. There are a lot of businesses that are operating as sole proprietorships.
Because they either are unaware of the benefits of incorporation. Or have the misconception that it is complicated and expensive.
And while they might realize that incorporation itself is not expensive. And can be done for small amount, compared to the taxes that they will save once they incorporate. Paragraph the misconception is often that it is going to cause them to have extremely high accounting fees.
Because they will have a much more complex year end, because instead of being able to file their sole proprietor taxes with their own personal taxes. They will have to hire an accountant, and do a corporate year end.
However, Vancouver accounting firm says it does not have to be complicated or expensive. And the year-end filings can be as easy. As handing twelve bank statements over to their accountant. And coming to a meeting, to discuss their next year’s tax planning.
Also, business owners are under the assumption that once they incorporate. They are going to need to buy accounting software. And learn how to use it, and start doing their own bookkeeping. This is also unnecessary. Especially when they are small.
And once entrepreneurs realize that as long as they do not need accounting software for they incorporate. They are not going to need it just because they incorporated. And if they have any concerns about this, they can simply ask their Vancouver accounting firm during their appointment.
It does not need to be complicated. And when entrepreneurs realize how easy it can be. And help much taxes they are going to save once they incorporate. It becomes a much easier decision. Helping entrepreneurs not only save taxes.
That end up understanding their finances better. That will allow them to run their business more efficiently and effectively. So that they can grow their business as well.
Another reason why entrepreneurs should consider incorporation. Is because it is going to help them save taxes. Even when they are very small. Because the tax rate that they pay as a sole proprietor. Is the same tax percentage that they pay on their personal taxes.
Which in British Columbia, tops out at fifty-three point 5%. So if an entrepreneur is at the top tax bracket. Or with their business revenue, if they end up at the top tax bracket. Then they will be paying over half of their business revenue in taxes.
And by incorporating their business, they can stop paying half of their business revenue in taxes. And only pay 11%. Which is the corporate tax rate across Canada. Therefore, this will help entrepreneurs, even small businesses. Save a significant amount of taxes. Which they can then use to help them grow their own business.