Vancouver CPA | Is It Beneficial to Incorporate
Often, business owners do not incorporate to save money says Vancouver CPA. Or, they do not understand the benefits of incorporating. And so they are not incorporating their business early on. And not seeing the benefits they could have if they had incorporated their business sooner.
One of the most significant reasons that business owners should incorporate. Is because the tax rate for businesses that are incorporated is 11%. Once a business incorporates, they will start getting their business income taxed at that 11%.
However, as a sole proprietor, businesses will be taxed at the tax rate that they are currently at. Unless their business income bumps them into a higher tax bracket. And the highest personal tax rate in BC is currently fifty-three point 5%.
Which means it is very possible that business owners are having their business income taxed at over 50%. This can cost a significant amount of money to a business owner. Which is one of the reasons why Vancouver CPA recommends entrepreneurs incorporate as soon as possible.
However, many business owners are still hesitant to incorporate. Because they understand that there will be more accounting requirements once they incorporate. Such as needing an accountant to prepare their corporate year-end.
As well as their financial statements, and reports to Canada revenue agency on their behalf. They understand that paying for these accounting services from their Vancouver CPA can cost more money.
And while they understand that they can save taxes, they think that will pay more in accounting fees than they will save in taxes.
However, business owners only have to be making approximately fifty thousand dollars a year in business income. Before the tax savings outweighs the accounting fees that they will have to pay.
And with such a significant amount of taxes being saved. Business owners can use this money to help them grow their business. By hiring more staff, purchasing assets. Or even spending that additional money on marketing and advertising to help them gain more customers.
Another financial benefits of incorporation is that business owners will not have to pay the employee and employer contribution of CPP once they incorporate. This is something that many proprietors are not aware of until they reach their year end.
And have to pay an additional fifty-two hundred dollars for the employee contribution of their own CPP. However, they can immediately save this money by incorporating. Because once they incorporate, they will not have to pay their employee portion of CPP.
Small business owners are on such a small budget anyway. That being hit with an additional fifty-two hundred dollars at the end of the year. Can be difficult or impossible for them to pay. So if this owners want to save this tax, they should incorporate their business sooner rather than later.
If business owners have any other questions about the costs or savings of incorporation. They should make an appointment to meet up with their Vancouver CPA. And ask all of the passions they need. To make the decision that is right for them and their business.
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While many business owners often think of incorporation as a way of saving taxes according to Vancouver CPA. There are a lot of benefits outside of financial. That business owners should be open or of. In order to make the right decision on whether incorporation is the right thing for them to do.
One of the first benefits of incorporation that business owners can get right away. Is that it will give them limited liability. In case they get sued while conducting their business. By being incorporated, it is the company that gets sued and not the individual business owner.
This is especially important if a business owner has assets, such as vehicles or home where their family lives. To minimize that risk, and protect their assets. Business owners often choose to incorporate. So that their company can hold any liability associated with running their business.
Another benefit of incorporating is that it can legally protect their tradename. While many entrepreneurs assume that registering that tradename legally protected. All it does is give it a placeholder.
That placeholder will not prevent other people from incorporating using that name. So to protect the name that they are building. Business owners should incorporate, so that they have the legal rights to their own businesses name.
Another benefit of incorporating, is that it will help businesses who work as independent contractors. To get hired on at more job sites than if they were sole proprietors. How this works, is some companies will simply refuse to hire sole proprietors.
The reason why do Vancouver CPA. Is because Canada revenue agency may consider sole proprietors to be employees of the business. Instead of separate businesses.
And if this is the case, the company will then owe all of the payroll remittances that should have been over on that contractor if they were an employee.
This can equal several thousand dollars that the company will then owe the government. That they could have avoided paying if they had only hired contractors who were incorporated. Which is why they often have this standing policy.
As a small entrepreneur, business owners should do whatever they can in order to be able to take on as many jobs as possible. And get hired on to as many jobsites as possible. And by incorporating, they will be able to take more jobs than before. Because they will be able to work on more job sites.
This will help business owners grow faster, because they will have to refuse jobs. Which is one of the most important reasons why business owners should incorporate, even without considering all of the financial benefits of incorporating.
However, there are even more benefits of incorporating. And if business owners want more information on this, and how incorporation relates to their business specifically. They can set up an appointment with their Vancouver CPA, and get all the questions answered so that they can make the right decision.