Vancouver CPA | Benefits of Incorporation
When business owners put off incorporating their business, they miss out on opportunities according to Vancouver CPA. Because there are many benefits from financial, to helping businesses grow. That come from incorporating.
Before businesses decide that they should not incorporate their business. They should make an appointment with their Vancouver CPA. In order to find out how it can benefit their business. So that they can make an informed decision.
The first things that business owners should know about filing taxes before they incorporated. Is that as a proprietor, they will file their business taxes along with their personal taxes. They simply have to fill out a separate form, and have an additional forty-five days to file taxes.
However, while there are not going to be any additional accounting requirements as a proprietor. Business owners will also have their business taxed at the personal tax rate. And while this might not seem like a big deal, it can mean a lot of extra money paid to the government.
The reason why, is because in the highest personal tax rate in BC is currently fifty-three and a half percent. Which means if business owners are close to the highest personal tax rate. Or with their business income. Is at the highest tax rate.
That means their business income is being taxed at or above 50%. Which can mean a lot of money that could be spent in the business, going to Canada revenue agency. However, once business owners incorporate. They will be taxed at the corporate rate of 11% instead.
This is a savings of over 40%. This is money that business owners could use in other areas of their business. From hiring new staff to help them grow their business, to purchasing assets that they need to remain competitive. And even using that money to spend more on sales and marketing.
Anything that they do with the money is going to help their business more than just handing it over to the government. And although there are additional requirements for accounting and reporting to Canada revenue agency.
However when they hire their Vancouver CPA to take care of their accounting requirements. They will still end up paying less money then if they had stayed as a proprietor, and was paying a high personal tax rate for their business taxes.
In fact, Vancouver CPA did some calculations. And found out that as long as a business was invoicing a minimum of fifty thousand dollars every year. It makes more sense to incorporate their business. Because they will pay less money overall. Even though they are paying more in accounting bills.
However, business owners should not make this decision lightly. They should contact their accountants, and set up an appointment. To get all of their questions answered. About all of the benefits of incorporation. As well as what the costs are. So let business owners can make an informed decision about what is right in their business.
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If businesses are not incorporated, Vancouver CPA says that they would be called a sole proprietor. And while many businesses remain sole proprietors until they have grown their business to a certain size.
It is not always advantageous for business owners to remain a sole proprietor. Because there are so many benefits of incorporation. That any costs associated with incorporation. Will not end up being important, when considering all of the benefits.
One of the first things that business owners should realize, is that as a sole proprietor. If they get sued while they are conducting their business. They personally will get sued. Which means their accents are actually at risk, such as their vehicles or property that they own such as a home.
And if business owners have a family, such as a spouse and children. And their family is living in their home. They can risk making their family homeless. If they get sued. Which is often why many people decide to incorporate. Because this gives people limited liability.
Even in a low risk business, business owners do carry the risk of being sued. And if they get sued after incorporating. The corporation will hold the liability, and will be the entity that gets sued instead of the business owner. This does not necessarily mean that there is zero risk to the business owner.
But it limits that business owners risk significantly. Which can help protect their assets. Particularly and especially a family home, where their children are living. This is why many business owners choose to incorporate. Even if it costs them money in their business says Vancouver CPA.
Another way that a corporation protects the business owner. Is by legally protecting their tradename. Many business owners assume that by registering their tradename that they legally protected and this is not the case. Registering the name simply acts as a placeholder.
But any other business or person could come along and take that name and incorporate using it. And they would then gain the legal rights to the name. Which is why they should incorporate as quickly as possible. In order to protect the name that they are using.
Another great reason to incorporate is because it can help business owners get a WCB number. And if they are operating as a contractor or subcontractor, this can be extremely important. For example, many job sites require each contractor to have their own WCB number.
However, WCB will not issue numbers to sole proprietors. Because they make the assumption that so proprietors can get covered under a prime contractor. When in reality, prime contractors often refuse to exempt their WCB coverage to another contractor.
Because if there is a claim, that prime contractors premiums will increase. And they will want to avoid that, so they will not cover subcontractors. Therefore, if businesses decide not to incorporate. They often are not allowed onto many job sites.
By incorporating, business owners can ensure that they can have access to any and all jobs that they might be offered. Which will help them grow as fast as they are able to get jobs. Which is why Vancouver CPA often recommends sole proprietors incorporate.