Vancouver CPA | Deciding to Incorporate Your Business
It can be a big decision when a business owner decides to incorporate their business according to Vancouver CPA. The reason why, is because many businesses do not start by incorporating their business. Because they are not making enough money yet. And they want to save money early on.
And while incorporating a business can results in additional accounting fees from Vancouver CPA. This is because they will have additional reporting requirements. Such as submitting financial statements to Canada revenue agency. Such as balance sheets and income statements.
As well as preparing T4 and T5 slips at the end of their corporate year. As well as doing some tax planning on behalf of the business owner. And this additional accounting requirements. Can cost a business owner more money.
As a sole proprietors, business owners do not have the same accounting requirements. And they simply have to file their business year end along with their personal taxes. And it is just another form to fill out. With single ended accounting practices. Which can be a lot more inexpensive.
However, although they can save money on their accounting bill at the end of the year. Business owners may not realize that as a sole proprietor, their business is getting taxed a personal rate. And with the personal rate in BC topping out at fifty-three and a half percent.
This can be a significant amount of the businesses money going to taxes that it does not need to. Because the corporate tax rate is only 11% throughout Canada. And once a business incorporates, they can stop paying personal taxes on their business income. And starts paying only 11%.
While this might not make a huge difference to many business owners when they are very small. But the threshold in which it becomes less expensive to incorporates, and save taxes. Is a lot lower than many business owners realize. In fact, a business only has to make fifty thousand dollars a year on average.
In order to save money through incorporation. And while many people think that that is fifty thousand dollars in money that they have paved themselves. Vancouver CPA says this is not the case. It is just as long as they have invoiced at least fifty thousand dollars a year, it will be a tax savings.
Because this threshold is much lower than many business owners assume. The recommendation is for business owners to incorporate before they get to that threshold. Otherwise, they can end up paying a significant amount of taxes because they have not incorporated in time.
While it can be a stressful decision for business owners to know when the right time to a poor break is. This decision can be made a lot easier by looking at the facts. And having a free consultation with their Vancouver CPA. In order to find out all of the facts as it relates to their specific business.
Once business owners incorporate, they will be able to save a significant amount of taxes. They can put back into their business in the form of hiring staff, purchasing assets. Or even spending money on marketing and advertising. So that they can grow their business even larger.
When will you need to hire a Vancouver CPA?
Often, business owners look at incorporating their business as a financial decision says Vancouver CPA. However, they need to understand the many benefits of incorporating. Over and above saving taxes.
While many people think that there are advantages of remaining a sole proprietor. One of the only benefits is that they do not have to pay an accountant to do their year end. Because they can file along with their personal taxes.
However, there are many more benefits to incorporating a business. That may be very surprising to business owners. Which is why they should make an appointment with their Vancouver CPA. And find out all of the benefits. In order to make the decision that is most beneficial to their circumstances.
For example, one surprising benefit. Is that incorporating will actually help people get a WCB number in British Columbia. If a business owner is a sole proprietor, they may be turned down for a WCB number. Which will make them ineligible to work on certain job sites as a subcontractor.
While many sole proprietors think that they can get coverage from the main contractor. Many main contractors do not wish to extend their WCB coverage to sole proprietors. Because if they have a claim, it will drive up their own WCB premiums.
Therefore, business owners who incorporates will have no problems getting a WCB number. Which will allow them to work on any variety of job sites because they will have a WCB number that they can use. If a business owner wants to be able to bid on more jobs. They should incorporate their business.
Another reason why they should incorporate their business. Is because many companies actually have a policy. Refusing to hire sole proprietors as subcontractors on their jobsite. The reason for this, is because sole proprietors may actually be deemed employees by Canada revenue agency.
And if this is the case, the companies that hire the sole proprietors as a contractor. Will owe all payroll remittances such as income tax, CPP and EI. Dating all the way back to the first day that the sole proprietor set foot on their jobsite.
The company will also the worker vacation pay, and severance when they no longer work for the company. And so to avoid this risk, many companies simply make a policy that they refuse to hire sole proprietors. And will only hire independent contractors that have incorporated.
Once they incorporate, companies will never run the risk of having Canada revenue agency deeming those contractors as employees. Which will completely eliminate their risk. Therefore, business owners can end up being able to work multiple more job sites when they incorporate.
There are so many benefits to incorporating. That small businesses can work on even more job sites once they incorporate. So if they are truly serious about wanting to grow their business, they should incorporate. So that they can not be limited to where they can work.
If business owners want to even more information on incorporating. They should set up a consultation with their Vancouver CPA, and find out all of the information they need. In order to make the best decision for their business.