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One of the reasons why businesses do not incorporate sooner in their business according to Vancouver CPA. Is because they think that it is an additional expense, that will result in additional accounting bills.
And while this is true, there is additional reporting requirements. And the accounting will be more complex. Often requiring a business owner to hire a Vancouver CPA to work on their financial information.
However, the benefits of incorporating, is that they will be able to get taxed at a significantly lower tax rate. Then if they remained a proprietor in their business. Since proprietors file taxes of the business at the same time they file their personal taxes. They get taxed in their business at their personal tax rate.
And how much people are getting taxed, depends on how much income they are making. And the amount of money that they are claiming for their business. Can bump this personal tax rate up into another tax bracket.
And since the highest personal tax rate in British Columbia is fifty-three point 5%. It is quite possible that some business owners can be taxed more than 50% for their business income. Which can be significantly detrimental to their business.
And even if people are not at or even close to the highest personal tax rate. They are still going to be paying more than 11% in taxes as a proprietor. Each is one of the most convincing reasons to incorporate.
However, many business owners still think that even though they will be paying more taxes. That they are going to have to be an extremely large company. Making hundreds of thousands of dollars each year. In order to benefit from incorporation.
However this is not the case, even small business owners making fifty thousand dollars a year. Can benefit from incorporation. And end up farther ahead financially when they incorporate. Even taking into consideration the additional accounting fees that they will incur.
And while this is a significant tax savings. Vancouver CPA says there are even more benefits, financially to incorporating. For example, proprietors are expected to pay the employee and employer portion of CPP.
And most business owners when they are first starting out are unaware of this. And receive an additional bill for fifty-two hundred dollars and the end of the year from Canada revenue agency. Which can be very difficult or even impossible for business owners to pay.
And even if people are prepared for this additional expense. This is again fifty-two hundred dollars that business owners simply do not have to pay the moment they incorporate their business.
Therefore, when taking into consideration the lower business tax rate. As well as not having to pay a fifty-two hundred dollar additional tax bill at the end of the year. Incorporation makes significantly more sense to business owners.
If entrepreneurs have any further questions however, they can always set up an appointment with their Vancouver CPA. In order to find the answers to their questions. And find out if incorporation is still the best option for them.
Strictly speaking, many people look at incorporation as a financial matter says Vancouver CPA. And while it does cost money to incorporate, as well as to have the additional reporting requirements completed by an accountant. And it helps business owners save taxes on their business income. There is even more benefits to incorporation than financial.
One of the first things that incorporation will do for business, is protect the tradename. Despite the fact that many business owners will have register their tradename at corporate registries office. This is just a placeholder. And will not legally protect their name.
This means that other people can use that name, and even incorporate their own business. Using the name that business owners have spent years building A business around. Which is why this owners should consider incorporating.
When they incorporate, they will legally protect their name. And they can keep other people from using the name. And make it impossible for other people to incorporate using the same name. Which is just one of the benefits of incorporation.
Another benefit of incorporating according to Vancouver CPA. Is limiting the business owner’s liability in the business. Other the business is a high risk business like a plumber or electrician. Or low risk business like an accountant or graphic designer.
All businesses have an inherent risk of getting sued through the nature of conducting their business. And becoming a corporation, can help business owners shield themselves from getting damaged by potential lawsuits.
If business owners are not incorporated, and their company gets sued. There is nothing that is going to protect the business owners assets if the lawsuit goes through. Putting their home, and vehicles at risk.
However, once a business owner incorporates, it is the company itself as an entity that will get sued. And because of that, will make it more difficult for the business owner and any directors of the corporation to have their assets affected in the case of a lawsuit.
This is why business owners who do have personal assets may want to consider incorporation. Just as a mechanism of protecting those assets in the event of the worst case scenario.
Another benefit to incorporation is that it will help business owners secure loans from banks or other financial institutions. Because banks will typically not issue business loans to sole proprietors. Therefore, if business owners ever think that they may require a bank loan in the near or distant future of their business.
They should incorporate their business sooner rather than later. So that when the moment arises that they need a bank loan. Whether it is to buy a building to conduct their business in, do leaseholder improvements. Or in order to buy assets that will help them run their business, or grow their business.
They can apply for the bank loan, without having to first incorporates. Or without putting the ability to qualify for that loan in jeopardy. Which can cause a business owner a delay in getting the funds they need to grow their business.
There are so many advantages of incorporation. That business owners want to hear more about how their business can benefit. They can set up a consultation with their Vancouver CPA, in order to find out all of the ways they can benefit.
