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

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Vancouver CPA | Incorporate Right Away

 

Many new entrepreneurs decide to hold off on incorporating their business says Vancouver CPA. Often because they want to save money wherever they can. And they understand that incorporating will require them to have to hire an accountant which can cost more money.

As a sole proprietor, business owners will have a lot less accounting requirements. Only needing to complete single ended accounting. And one form to fill out at the end of their year. And file their business taxes alongside their personal taxes.

And while this can be much more simple as well as easy to do. Business owners may not realize, that this means that they will be paying personal tax rates on their business income.

This might not seem like a big deal many business owners, but if they spoke to their Vancouver CPA. They would find that the corporate tax rate that they could be enjoying if they incorporated is only 11%. However, the highest personal tax rate in BC is currently fifty-three point 5%.

And if they are currently close to or at the highest tax rate. They could be paying significantly more in taxes than they would if they simply incorporated their business early on. However, many businesses make the assumption that they are not going to make enough of a tax savings as a small business.

Unfortunately, this assumption is wrong. And even small businesses can save so much in taxes. That even when they are paying more for their accounting. They are still going to save more money in the long run once they incorporate.

Vancouver CPA did the calculations, and found that once a business was invoicing approximately fifty thousand dollars per year. They would see financial benefits from incorporating their business. And pay less in taxes, even when taking into consideration the additional accounting fees that they have to pay.

Therefore, business owners should get the right information. And find out the benefits financially of incorporating their business. And when the right timing would be to do that. Ultimately, Vancouver CPA recommends that business owners incorporate sooner rather than later.

Because if they think that they will wait until they are at that threshold before incorporating. They might to grow their business so much in one year. That they pass that threshold. And end up paying more in taxes then they should have. And would have ended up paying less if they simply incorporated first.

And while there is a significant tax benefits to incorporating. Business owners also need to understand that there are other financial benefits as well. For example, sole proprietors must pay the employee and employer portion of CPP.

Many business owners may not realize this until they complete their taxes, and are asked for the employee portion of CPP by Canada revenue agency. This can be up to fifty-two hundred dollars additional taxes that they owe the government.

And if they have any staff in their business, that can equal a lot of money that they are not able to easily come up with. Which can result in penalties and late fees.

With all of the financial benefits of incorporation. Businesses even when they are small. Should find out what these benefits are. So that they can make the decision that is right for their business.

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When decision that many business owners often make according to Vancouver CPA. Is that they are going to incorporate their business later on and not right away.

Business owners often make this decision, because they are not aware of all of the benefits of incorporation. And while many entrepreneurs understand that it can help them save taxes.

Even before they reach a point where that tax savings comes into effect. There are other benefits that they can enjoy.

One significant benefits of incorporation is that it will give a business owner limited liability. Which means if they get sued while conducting their business. It is the company that gets sued, and not the business owner personally.

If an entrepreneur has any assets, they will want to protect those assets. Particularly if it is a family home where their spouse and children are living. And even if a business owner thinks that they have a low risk business.

Even a low risk business carries inherent risks according to Vancouver CPA. And business owners should not gamble with their family home, thinking that Bill never get sued because they have a lower risk business.

The next thing that business owners can benefit from by incorporating. Is protecting their tradename. Because despite what they might think. Registering their tradename does not offer them the legal protection of the name.

This will not stop other people from incorporating under that name. And whoever incorporates that tradename will have legal rights to it. So business owners who are spending time building a business. Should protect the name that they are creating by incorporating.

Another benefit of incorporating will be that it can help business owners get a WCB number. A WCB number is necessary in order to work on several job sites. And WCB will not give numbers to sole proprietors. Under the assumption that they can get very be coverage from the prime contractor.

However, many prime contractors will not extend their WCB coverage. Because if the sole proprietor makes a claim. The prime contractors premiums will increase. And they will not want to risk having their premiums increase.

Because of that, business owners who are sole proprietors may not be able to take jobs on certain job sites, because they will not have WCB coverage. This is why even small businesses can benefit from incorporating.

Allowing small businesses to take an even wider variety of business that they would not have been able to before. To help them grow as large as they can, as fast as they can.

To find out more information about these and other benefits of incorporation. Business owners should that up an appointment with their Vancouver CPA. In order to make the decision that is right for their business, that will help them grow and be successful.