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Many business owners may not understand why incorporation is so beneficial to their small business according to Vancouver CPA. But once they understand how their business can benefit. It can become a much easier decision for them to make.
Many business owners make the assumption that it is something that is only beneficial for large companies to do. And for small businesses, it is cost prohibitive to do. Because they will have increased accounting requirements.
Because they will have to file corporate year ends. As well as report to Canada revenue agency on a regular basis. These additional accounting requirements. Will require business owner to hire a Vancouver CPA. And that additional bill can cost a small business owner a lot of money.
However, the amount of money that business owners will save in taxes alone. Will offset the accounting bills that they will get. And allow them to either save that money in their business. Or use it to grow their business even larger.
Business owners need to understand that if they do not incorporated. They will be considered a proprietorship, and they will file their year-end taxes at the same time they file their personal taxes.
And all they have to do is fill out an additional form, and submit their personal and business taxes to Canada revenue agency at the same time says Vancouver CPA.
However, it is important to note that when they do this, they will be paying personal tax rate on their business income. And if they have earned a lot of income in their business, that can bump the month into a higher tax bracket.
Or perhaps, the business owner is already at the highest personal tax rate. Which in British Columbia is fifty-three point 5%. And that sounds very high, when compared to the corporate tax rates across Canada. Which is 11%, that 53% can seem even higher.
Therefore, simply by incorporating the business, business owners can start saving potentially more than 42% in taxes. Which can equal a significant amount of money, even after they pay for their additional accounting bills.
Business owners can use this additional money that they save to accumulate wealth, have a savings in their business. Or use it to help them grow their business.
They can do this by hiring new staff, by purchasing assets. Or even by simply increasing their online marketing spend. So that they can attract more customers to their business, and sell more products and services. Jewel allow them to grow the revenue in their business.
And while it can help us owners save money in their tax rate at the end of the year. It can also help them save taxes, because sole proprietors must pay the employee and employer portion of CPP. Which can equal an additional fifty-two hundred dollars a year.
However, if business owners incorporate, that additional tax goes away, and they no longer have the additional tax. Which can help them save even more money, that they can use to help grow their business.
Many small business owners are not sure what incorporating their business will do for them says Vancouver CPA. Which is why they may avoid making the decision to incorporate their business.
However, in addition to being some significant tax savings. There are additional benefits of incorporation. That business owners should understand, so that they can make the right decision to incorporate their business as early as possible.
One of the first things that they will benefit from incorporating. Will be being able to protect their tradename. While many business owners make the assumption that by registering their tradename at corporate registries office. The legally protected this is not true.
It offers them a placeholder, but if another company decides to incorporate that tradename. There will be nothing that the business owner can do to stop them. Which is why Vancouver CPA will recommend that business owners incorporate as quickly as possible.
Another way that business owners can protect themselves by incorporating. Is by protecting themselves from getting sued. Which also protects their personal assets. Which is incredibly important of a business owner has vehicles or.
By incorporating, the business shoulders the liability, and if a company gets sued. Is the company as an entity that gets sued. Is that of the business owner that gets sued personally. If a business owner gets sued personally while conducting their business, it puts their personal assets at risk.
Which is why any business owner that has assets should incorporate. To protect those assets. And while it does not give them 100% protection says Vancouver CPA. It will make it much more difficult for businesses to have their assets affected if they get sued.
Even if a business owner is in a low risk business, there is always a risk that they might get sued will conducting their business. Therefore, they should not use the justification that they were low risk business, is do why they should not incorporate.
Another way that business owners can benefit from incorporating. Is by being eligible to receive loans. Financial institutions and banks will not issue business loans to sole proprietors.
And if a business owner ever may want to get a loan. Whether it is to buy a building, purchase assets that will help their business grow. Or even to do things like leasehold improvements on their office.
They will not be able to qualify for the loans to do what they need to grow their business. Which is why business owners who are thinking that applying for loan is even a slim possibility in their future. Should incorporate their business early on. So that it does not become a barrier to being able to qualify.
While these are just some of the benefits of incorporation. If business owners have any questions specifically about their business, and very unique circumstances. They can contact their Vancouver CPA office. And arrange a consultation, so they can have all of their questions answered.
