Vancouver CPA | Why Companies Should Incorporate
There are many benefits of incorporation according to Vancouver CPA. That many people are unaware of, when they first start their business.
In small businesses often make the assumption. That their business is not large enough to incorporate yet. Or that they simply do not know all of the benefits of incorporation.
This is why it is very important that small business owners set up an appointment with their Vancouver CPA as soon as possible. So that they can get all of the information. To make the right decisions early on in their business.
One main advantage that incorporated businesses have. Over and above sole proprietors. Is that they will get their business income taxed at the corporate rate of 11%.
While sole proprietors will have their business income taxed at the personal tax rate that the entrepreneur currently has. Which tops out in British Columbia at fifty-three and a half percent.
This means that proprietors are going to be paying much more in taxes than they would if they were incorporated. And while many business owners make the assumption.
That it is not going to amount to a lot of money until they are making hundreds of thousands of dollars in their business. This actually is not true, and even small businesses, and entrepreneurs that are the only employee in the business. Can save a lot of money.
The amount of money that Vancouver CPA has calculated a business owner should make. In order to financially benefit from incorporating. Is only fifty thousand dollars on average.
Which means if a business owner is generating around that amount per year in their business. It is financially beneficial for them to incorporate their business.
Even if a business owner is not yet at that threshold. It is recommended that they incorporate before they get to that amount. That way, they will not end up paying more in taxes than they should, before they are able to incorporate their business.
Another reason why businesses should incorporate sooner rather than later. Is because it can cause a business owner to end up paying more in taxes. By paying more in CPP than they realize they have to do.
As long as a business is a proprietorship, they must pay the employee and employer contribution of CPP. Which will equal more than five thousand dollars of additional taxes every year.
And if entrepreneurs do not know this, they could get assessed from Canada revenue agency with that additional tax bill. Which can be difficult or impossible for small businesses to pay. And can be very hard bill to pay at the end of their year.
Therefore, business owners can avoid this additional tax bill at the end of the year. By incorporating their business. Because once they are incorporated, they no longer have to pay both the employee and employer portion of CPP.
It is a financial benefit to their business for business owners to incorporate according to Vancouver CPA. Even if they are quite small. Which is why they recommend all business owners incorporate their business as quickly as possible.
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There are many benefits that entrepreneurs can enjoy once they incorporate their business according to Vancouver CPA. And while many businesses make the assumption that incorporation is about saving taxes. There are many benefits outside of tax savings.
One of the first things that business owners are going to be able to do once they incorporate, is get a WCB number. Which is very important to allow them to work as a contractor on many different job sites.
In fact, businesses that are sole proprietors may not be able to get a WCB number at all. Because WCB works on the assumption. They will be able to get coverage from the prime contractor on a jobsite.
Unfortunately, this does not usually work out. With the prime contractor typically refusing to cover subcontractors. Because if there is a claim, then it is their own premiums that will increase.
Therefore, businesses that do not have a WCB number may not be able to work on many different job sites. When they incorporate, they will be able to get a WCB number without problem. Which will increase the number of jobs they will be able to take.
It is very important especially for new businesses, who will not be able to afford to refuse to work on many jobs. And will need to be able to take as many jobs as possible when they are starting out.
In fact, some companies will refuse to hire contractors or subcontractors that are not incorporated. Because they run the risk of having Canada revenue agency consider those contractors to be employees of their business.
If they CRA does deem those contractors to be employees. Then the company is then on the hook for paying all of the payroll remittances that they should have paid. Dating back to the first day that the contractor was hired, and set foot on the jobsite.
This can end up costing a business several thousand dollars. Which is why many companies now how policy. Of never hiring contractors that are not incorporated yet.
Therefore, business owners will be able to increase the number of jobs that there able to except. And increase the number of job sites they can work on. If they simply incorporate their business early on.
Doing this can help them except as many jobs as possible. Them grow their revenue, and grow their business. This is one important reason why Vancouver CPA recommends even small business owners incorporate their business as quickly as possible.
And while it will help business owners work on many different job sites. Incorporating is also very important because it can help a business owner protect their own personal assets. Because as a sole proprietor, if they get sued while conducting their business.
It is their personal assets that are at risk. But if a company incorporates. It is the company that shoulders liability, and will get sued. Instead of the business owner directly. There are so many more benefits to incorporating.
And if business owners want to know how incorporating can affect their business specifically. They should set up a free consultation with their Vancouver CPA. And ask all questions they need. To be able to make the right decision for their business.