Vancouver CPA | When to Incorporate
Small business owners often struggle with understanding when the right time to incorporate their business would be says Vancouver CPA. Thinking that they do not want to incorporate to soon. Because of some additional costs associated with incorporation.
However, it is also very important for business owners to understand. That the benefits of incorporation. Can outweigh any of the associated costs of incorporating itself. As well as the increased reporting requirements.
By understanding what is involved with incorporating. The costs, as well as the benefits. Can help business owners make the right decision. About when the best time for them to incorporate their business would be.
One of the first things that business owners should understand. Is that before they incorporate, they will be submitting their business taxes alongside their personal taxes. And because of that, they will be getting taxed the personal tax rate on their business income.
And while that might not sound like a big deal immediately. Vancouver CPA says that the corporate tax rate is currently 11% throughout Canada. While the highest personal tax rate in British Columbia is over 50%.
And while business owners may not be at the personal tax rate. Which is why they are not concerned about paying personal tax rates on their business income. They need to understand that there tax bracket will increase when they submit their business taxes.
And even if they do not top out at the highest personal tax rate. They will be above the 11% corporate rate. And by paying any more taxes then they absolutely have to. Business owners are missing the opportunity to spend that money that there giving the government on their business instead.
The money that they save can go towards hiring new staff, helping pay bills, purchasing assets. Or even towards their sales and marketing, to help them find more customers. To allow them to grow. Spending the money in the business instead of giving it to CRA. Can be very beneficial for business owners.
However, many business owners also know that there will be additional accounting requirements. That will require them to hire a Vancouver CPA. To do their corporate year end, creates their financial statements, tax planning. And speak to Canada revenue agency on their behalf.
And that additional accounting can end up costing them money every month that they would not have if they remained a sole proprietor. However, the amount of taxes that they will save. Even when offset by additional accounting fees. Will be greater then the amount that they will spend to incorporate.
Therefore, business owners should not make assumptions when it comes to deciding when to incorporate their business. And instead, get all of their questions answered directly from their Vancouver CPA. That they can make an informed decision.
And when that truly is the best decision for their business. The sooner business owners can make this decision, the sooner they can start saving taxes. And also getting great financial information every month. That will help them run a successful business.
Will getting a Vancouver CPA dent my paycheck?
While many business owners think the decision of them to incorporate is about how much money they make, Vancouver CPA says this is not necessarily true. There are many benefits of incorporating. Over and above the tax savings they will get.
By understanding all of these benefits, and how it can positively impact their business. Can help business owners decide when they should incorporate their business. And help them significantly grow their business because of it.
One of the first things that business owners should understand. Is that by incorporating, they pass on any liability they have conducting their business to the company. This means, that if a business owner is sued at all while conducting their business. It is the company itself that gets sued.
If they do not incorporated, and a business owner gets sued. It is the business owner themselves and their personal assets that are at risk. Such as vehicles or if they own their own home. That could be put at risk if the lawsuit goes through.
Therefore, if business owners want to protect themselves and their family from losing their home. They should incorporate, so that their corporation can hold the liability for them.
Another benefit of incorporating. Is protecting the businesses tradename. And while some business owners will have registered their tradename. This does not legally protected that name instead, it acts as a placeholder. But will not prevent others from using that name.
Therefore, when business owners incorporate, they are protecting the name that they have spent countless hours and energy building and promoting. Which is why they should think about incorporating sooner rather than later.
Another reason why business owners should incorporate, is because it will help them get a WCB number. Because WCB will not issue coverage to sole proprietors. Under the assumption that they will be working as a subcontractor, and will be covered under the prime contractors WCB number.
Unfortunately, many prime contractors will not extend their coverage to subcontractors. And the reason why is because if there is a claim, and their own premiums will increase. And so they keep their WCB number for themselves and their own employees.
However, once a business owner incorporates. Debbie CB will have no problem in issuing that company their own WCB number. Which means business owners will not be limited to what jobs they can take, or what job sites they can walk onto and work from.
And this is an extremely important reason why even small businesses should consider incorporating says Vancouver CPA.
In fact, some companies will refuse to hire sole proprietors. Because Canada revenue agency might deem them to be employees of the company. Which means they could be at risk for having to pay payroll remittances on so proprietors.
To completely eliminate this risk, they have the policy of fusing to hire sole proprietors. This is another example of how business owners who can land or jobs simply by incorporating. Which is why they should incorporate their business sooner rather than later.
To find out how in corporations can affect their business specifically, business owners can make an appointment with their Vancouver CPA. And ask as many questions as they need. To get all their answers to make the right decision for them.