Image by photographer Alessia Giuffrida
There are many notable tax advantages to incorporating your business. Deciding if and when to take your company to the next level should take into consideration all these implications before making it official.
A huge tax advantage of incorporation is being able to deduct business expenses that your company incurs. When you include items such as travel expenses, equipment and general maintenance costs of keeping your incorporated business running, the ability to deduct these can soon add up and leave you financially better off. Not only that, medical insurance that your employees pay or that you pay on behalf of your company is 100% deductible, eliminating a huge tax burden. Incorporated businesses may be liable to lower tax rates on your income than if you were self-employed, so it's worth doing your research.
The early stages of your business can sometimes be financially turbulent and you may experience losses. If you incorporate, you are able to deduct them from your income tax. It can offer some relief that should your income be less than your costs or you were forced to write off items sold at a loss, you are able to remove these from your tax bill reducing your overall tax liability.
Although often difficult to define, business purchases can also be deducted if you incorporate your business. These might include a work car for example, which when used for 'business purposes' is liable to have the mileage, repairs and gas expenses totaled up and deducted.
A huge benefit of incorporation is that you determine what salary you reward yourself with. These allow you to keep business income and personal salary separate, reducing the social security you are required to pay. Rather than the entire income being liable to social security tax, you would only need to declare what you took home as a personal wage. Considering self-employed individuals report social security tax taking up 15% of their income earned, it is a considerable benefit of incorporating your business.
TO FIND OUT IF INCORPORATING YOUR BUSINESS IS RIGHT FOR YOU OR FOR OTHER EXPERT TAX ADVICE, CONTACT US TODAY
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