Vancouver CPA | Incorporation Benefits
If business owners decide not to incorporate, because they do not want to incur extra costs, Vancouver CPA says that might backfire. Because even though there is additional costs to incorporating. As well as additional accounting requirements. The benefits outweigh the costs.
As a sole proprietor, business owners would have to file their business taxes alongside their personal taxes. But as a results, would get taxed the personal rate of taxes on their business income. Which can result in almost 50% or higher taxes on business income.
While the corporate tax rate in Canada is currently at 11% according to Vancouver CPA. So business owners can often save over 40% in taxes on their business income. And they can take the money that they save, and put it towards their additional accounting costs.
And still and up farther ahead financially. Then if they decided not to incorporate at all. They would end up paying far more in taxes in the long run. Which can be a coach or detriment to their business. Especially if their business is continually growing.
And while some business owners do understand that the tax rate is much lower for incorporated businesses. They do not think that they are making enough money in their business. In order to bother with incorporating.
Because they think they have to make hundred thousand or a quarter of a million dollars. In order to make any significant savings on their taxes. This is not the case. Even very small businesses will come out ahead financially. If they incorporate their businesses, and pay a lower tax rate.
In fact, Vancouver CPA did some calculations. And found that as long as a business was invoicing about fifty thousand dollars each year. They would benefit from incorporating. And will end up paying less in taxes. Even if they added the cost of their accounting fees to that calculation.
And in the grand scheme of things, the additional accounting fees that they would have to pay. Is for the corporate year end, some tax planning, and preparing financial statements. Such as balance sheets and income statements on a monthly basis. And then report to Canada revenue agency.
And while this is additional accounting requirements. It can help business owners run their business much more efficiently. By giving them more up-to-date and accurate financial information. Then if they were simply trying to run their business with their single ended accounting methods.
Therefore, not only will they and up saving more money. But they will end up with better financial information. That can help them run their business more efficiently. And grow their business, so that they can make even more money in future years.
However, any businesses that want to ask any questions. And understand how this relates to their specific circumstances. Should contact Vancouver CPA for a free consultation. And find out all of the information that they need in order to make the best decision for them.
Ultimately, business owners can benefit from incorporation. And finding out all of the benefits can help them make the right decision.
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Even though many business owners have heard that they will pay a lower tax rates if they incorporate says Vancouver CPA. They also need to understand that there are non-financial benefits to incorporation. And by understanding these benefits. Can help business owners make the right decision for their business.
One benefit that they need to understand. Is that some companies refuse to hire contractors that are sole proprietors. And the reason why, is because those companies run the risk. Of Canada revenue agency deeming those sole proprietors. To be employees of the company.
Therefore, if a company hires a sole proprietor and CRA considers those contractors to be employees. They will owe all payroll remittances, such as income tax, CPP and EI. Dating all the way back to the first day that they walked onto the jobsite.
And this can end up being several thousand dollars that a business will then have to pay the government. Just because they hired someone who was a sole proprietor instead of an incorporated contractor.
This is why many companies simply refuse to hire sole proprietors. And require any of the contractors to be incorporated. Because once they are incorporated, they have their own requirements of reporting to Canada revenue agency. And will never be deemed an employee of the company.
Which means if a business owner decides not to incorporate. They may not be able to be allowed onto several jobsites. And may have to pass on a large number of jobs. Simply because they are not incorporated says Vancouver CPA.
Therefore, in order to avoid this, you business owners should incorporate, and then not be limited to only going onto jobsites where they can hire sole proprietors. This help business owners accept more jobs, and help them grow larger, because they will have no limits.
Another benefit to incorporation. Is that they will be eligible to receive bank loans. Because financial institutions will not give business loans to sole proprietors. Bank loans can help business owners by buildings, complete leasehold improvements. And by assets that they need to grow larger.
Therefore, if a business owner is ever going to want or need to borrow money from the bank. They should incorporate early on. So that being a sole proprietor does not prevent them from applying for the loans that they need in their business.
Another benefit of incorporation, is that they can protect their tradename. So that nobody else can legally use it. And while many business owners think that registering that tradename gives them the same protection, this is not the case.
Therefore, business owners want to protect the name that they have spent a lot of time, money and energy losing and promoting. They should incorporate, and gain the legal rights to that name.
It can be extremely important for many businesses to incorporate. And even when it is not a financial decision. Is often the right one for businesses. However, if they still have questions they can set up an appointment with their Vancouver CPA, and have all the questions answered. So that they can make the right decision.