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When business owners start a small business, Vancouver CPA says they may not want to incorporate initially. Because they are not sure that the business is going to be successful. So they want to hold off and wait.
However, many business owners may not realize. That by stalling on when they are going to incorporate. Can cause their business to not be successful. Because of the increased taxes that they will have to pay.
As well as all of the ways that incorporation can benefit their business. That they will not have at their disposal, if they decide not to incorporate their business.
A great example of this says Vancouver CPA. Is if they decide to remain a proprietorship, which means they will get taxed at a personal tax rate. Instead of the corporate tax rate that corporations enjoy.
What the personal tax rate they will get taxed that, depends on what tax bracket the business owner themselves is in. However, people need to know that in British Columbia, the highest personal tax rate tops out at fifty-three point 5%.
Which means there is a potential that their business income is getting taxed at over 50%. No matter how big or small a business is, having an increase of 40% can be very detrimental to that business.
And businesses that are paying that high tax rate to the government. Could potentially be saving that many by incorporating. And then using that additional savings to invest back into their corporation.
Either by hiring staff, paying bills. Or even purchasing assets that will help them grow. Increasing their marketing budget. So that they can attract even more customers to their business, and grow their revenue.
In fact, this is incredibly important for business owners to do. Because the single most common reason why businesses fail in Canada according to Vancouver CPA. Is because they are unable to find enough customers to buy their products and services.
So by saving taxes, and reinvesting that tax savings into advertising. Can help business owners increase the revenue they need. To remain viable in business. And avoid that high failure rate that Canadian entrepreneurs face.
However, this is not the only place that business owners can save money in their business. As a sole proprietor, they must pay the employee and employer contribution for CPP. Which is an additional five thousand dollars every year.
While this is a lot of money, most business owners are not aware of this until they get to their first year end. And then get assessed an additional tax bill that can be very difficult to pay.
If they are unable to pay it initially, not only will they get a late charge, but they will also get a penalty for not being able to pay it when they receive the new bill.
Therefore, incorporating can help businesses not only save taxes. But help them save that money, and then reinvested into their business. So that they can help their business grow, and increase their revenue. And remain viable.
Many small business owners hold off on incorporating their business according to Vancouver CPA. Because they know that it will increase their accounting bills. Because of the increased reporting requirements.
However, if this is the only thing that is keeping a business owner from incorporating. They should rate their business anyway. Because the benefits that they can enjoy will far exceed the additional work and higher accounting bill.
One of the first ways that business owners can benefit from incorporating their business. Is by reducing their own liability. In case they ever get sued while conducting their business. Whether they are in a high risk business or not.
Because there are inherent risks that any business owner has through conducting their business. If they ever get sued, when they are incorporated, it is the company that holds that liability. And not business owner themselves.
Which means if a business owner has assets such as vehicles, or family home that they own. They will want to incorporate, so that they can avoid putting those assets at risk if they get sued.
Another thing that they can protect through incorporation is their businesses name. Because until they incorporate, there name is not protected legally says Vancouver CPA.
Even though many business owners register their tradename at corporate registries office. This does not offer the same legal protection as incorporating. And registering it simply offers a placeholder. But will not prevent somebody else from taking that name, and incorporating using it.
And whoever holds the incorporation documents, holds the legal rights to that name. Which can be extremely important for business owner to incorporate. So that they can protect the name that they are building in their business brand.
Another benefit to incorporation, is being able to get approved for bank loans. Banks will not issue business loans to sole proprietors. So for business owner ever thinks that they may want to get a loan at any time in the future. They should incorporate sooner rather than later.
Whether they want a loan to purchase an asset that will help them grow their business. Or if they want to purchase a building, or do leasehold improvements on their current office space. The only way they are going to be able to do that, is through getting a business loan.
Therefore, business owners who want the ability to grow their business in the future. Should incorporate their business sooner. So that not being incorporated will never be a barrier to getting alone.
Even though these are many different benefits of incorporation. There are even more benefits that business owners can enjoy. Which is why anyone has any incorporation questions.
Should simply contact their Vancouver CPA for a free consultation. So that they can ask all of their questions. They may have special circumstances, or may want to ask questions about their own situation.
Regardless of what the questions are, getting all the facts will help business owners make the decision themselves on whether they should incorporate their business or not.
