One of the reasons why business owners should meet with their accountant and Edmonton bookkeeping company prior to setting up their corporations is to learn how they can set up their corporations to minimize taxes from the beginning of their business. However, very important that a business owner does this thoughtfully, and the right way. If they set up their corporation prior to meeting with their accountant, they may not be able to utilize all of the benefits.
The way their accountant and their Edmonton bookkeeping company is going to structure their corporation is by setting up a corporation whose sole purpose is to own the shares in the operating company. Therefore, if an entrepreneur does not set up the corporation correctly, it will be set up with this structure. Even though the holding companyís sole purpose is to control a business, they can also are in money by making money from profit shares, charging the operating company for management services, and by buying and selling assets. In fact, Edmonton bookkeeping says that entrepreneurs should put the assets that the business might use into the company and not the operating company as well.
Once this corporate structure is set up correctly, business owners need to understand what intercompany transactions are. These is transactions that happen between the holding company and the operating company. For example, if an entrepreneur is going to have the operating company pay the holding company for management services, they can simply transfer that money straight across. In fact, this is completely tax-free as long as all of the corporations are Canadian. And it is not just between the holding company and operating company, a business owner can do this with any companies that are called related companies. What a related company is, is when a shareholder that owns at least 25% of one corporation, owns at least 25% of another corporation, or their spouse owns at least 25% of another corporation.
Since intercompany transactions are extremely common when entrepreneurs own a holding company and an operating company, they need to ensure that they are keeping very accurate records at all times. That way, when their Edmonton bookkeeping company goes to do their books, they have all of the accurate information in order to enter the transactions into both corporations. Not only can this help business owners ensure that their financial statements are accurate, it can also help keep the year-end was accurate as well. This is extremely important, since not only transactions need to balance every month, but the year ends need to balance as well. When my that on entrepreneurs can ensure that this is possible, is by asking their Edmonton bookkeeping company to stay on top of all bookkeeping every month.
By understanding what this corporate structure looks like, and why an entrepreneur would choose to set their business up this way can help a business owner structure their corporation in a way that is going to allow them to demise the taxes that they pay, and use that money to increase their wealth and grow their business.
Edmonton Bookkeeping | Effective Strategies For Rising Taxes
Once an entrepreneur has consulted with their accountant as well as their Edmonton bookkeeping company and decided on what corporate structure is the best one for them to use, they can begin operating their company efficiently and effectively. One of the biggest benefits that an entrepreneur will have from setting up their corporate structure utilizing a holding company and an operating company is minimizing the taxes that they have to pay.
How an entrepreneur would typically manage the prophets of their business, is once their company has turned profit, they would distribute the dividends to all shareholders, within have to pay taxes on that amount. Since the highest personal tax rate in Alberta is currently 48%, and the average Canadian pays 43% in taxes, it is possible that shareholders would have to pay half of what they make in their business to the government in taxes. However, Edmonton bookkeeping says that instead of doing this, if a business owner has a holding company as well as and operating company that can look very different.
When their entrepreneur can transfer money intercompany tax-free, this is a way that an entrepreneur will transfer the money that they need to get paid in dividends to their holding company. There, they can talk to their Edmonton bookkeeping company and accountant to figure out the best timing to withdraw those funds to minimize the taxes that they have to pay. Or, they can even invest that money directly from their holding company and avoid paying personal taxes.
Another benefit of setting up their corporations this way, is helping an entrepreneur delay paying themselves if they ever have an overdrawn shareholder loan account. In order for this to happen, Edmonton bookkeeping requires the year ends of both corporations to be different. That is one of the reasons why it is very important that entrepreneur consults with their accountant before trying to set of corporations for themselves.
The benefits that business owners can get from setting up their corporation this way is protecting their assets and there dividends from creditors. This is extremely beneficial if an entrepreneur owns a risky business, to protect their assets and their finances in case their businesses at risk. Also, if someone sues the business, by not having their assets or their finances left in their operating corporation can protect it. Edmonton bookkeeping says that this is very important, and can help shelter an what the entrepreneur has worked so hard to achieve.
By understanding the benefits of a holding company and an operating company can help an entrepreneur ensure they set up their corporation specifically their accountant and their Edmonton bookkeeping company. By doing this ahead of time, can help ensure that when an entrepreneur’s business becomes profitable, they are prepared to protect their assets, accumulate their wealth and grow their business exponentially.