Just throwing this out there for some of you that may have more experience in the matter then i do. 6 months ago i went slef employed in construction, and home building, I have a very small company and although i wanted to work down to a managable size, it was impossible to do by myself. The last 6 months up untill the last 3 weeks have been super busy, and on paper the business was very sucessful, basicall doubleing my income of last year in only 6 months. My question is this, now with that larger income comes a massive income tax payback, basically all my profit and then some. Short of buying needless crap that i dont really need to have more business write offs, im at a loss as what to do for this next year. If the company stays busy my income will no doubt double yet again, and then im faced with yet again giving all the profit back to revenue canada. Im a sole proprietor right now, but going LTD., has come across my mind as of late, but what are the differences, and pros and cons, ive talked to my accountant about it recently but for me its almost like listening to a lawyer, none of it makes sense. I know the taxes are going to get everyone in the end . thats just part of life, but what can i do do lower this huge burden at the end of every year, i mean without going right into specifics of dollar amounts, on paper i made twice as much as last year, and yet everything i have saved in profit i have to now give back ...... Any intelligent feedback would be appreciated, from others that have some experience with this kind of thing. Thanks.
Self employment and its benifets , amd downfalls
- Thread starter storm1972
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I hear you all the way.
I spent all afternoon with my new accountant. Our new business has done the same thing; it outgrew our total expectations. We are currently sole propeiter business but as expected, after meeting with the accountant we our corporate bound. Maybe, our accountant will make the final decision after we submit our last years activities. As I have researched and our new accountant has confirmed, there are pro's and con's to moving into the corporate world. Each business has to be reviewed on its own merit. We already have incorporated companies.
Here is my advice, based on my experience. Knowledge is power, educate yourself on different business models. Understand that as your business grows you cannot do it all, surround yourself with experts. The upfront cost might seam excessive but the long term gain should pay off.
The other issue with experts id that you have to feel comfortable with them. I cannot express this enough, communication is key; if you cannot communicate with your expert, face the fact and move on.
From your post, find an accountant to speak with. Talk to your friends to find an accountant. Make sure to talk to more than one accountant, remember you have to work with the one that understands your business and you are comfortable with.
Short answer to your question. Feel free to pm me for more info.
Good luck!
I spent all afternoon with my new accountant. Our new business has done the same thing; it outgrew our total expectations. We are currently sole propeiter business but as expected, after meeting with the accountant we our corporate bound. Maybe, our accountant will make the final decision after we submit our last years activities. As I have researched and our new accountant has confirmed, there are pro's and con's to moving into the corporate world. Each business has to be reviewed on its own merit. We already have incorporated companies.
Here is my advice, based on my experience. Knowledge is power, educate yourself on different business models. Understand that as your business grows you cannot do it all, surround yourself with experts. The upfront cost might seam excessive but the long term gain should pay off.
The other issue with experts id that you have to feel comfortable with them. I cannot express this enough, communication is key; if you cannot communicate with your expert, face the fact and move on.
From your post, find an accountant to speak with. Talk to your friends to find an accountant. Make sure to talk to more than one accountant, remember you have to work with the one that understands your business and you are comfortable with.
Short answer to your question. Feel free to pm me for more info.
Good luck!
Polarblu
Active VIP Member
Im a strong believer in being a corporation in the just liabilities. If something catastrophic happens your company gets sued not you!! Most people as a proprietor have all their personal stuff involved and can be devastating. With a corporatoin you can still be all in but have that distance before the sheriff come knockin..... Im no accountant but had this explained to me as a young man since know-body figured i could make it!!
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- #6
well i do have a good accountant already and she has explained a bit of it to me, but just kind of wanted to view it from other sources that have experienced this, and what their thoughts on it are, im not a business guru type of person, I am good at what i do on the jobsite, but my skillset unfortunately ends there, paper work is all kept neatly and sent in to the accountant, gst , and wcb all paid on time ect, but this is new dark territory for me, and i just need more intel in english whether its a direction to follow or not. i dont know , i guess im just a bit frusterated when i look at it all and see i did make profit, but yet all that profit has to be given back to the cra, and then some..
funrider
Active member
i have been self employed for years in construction and have a good accountant if you haven't set aside tax money for double your wages then you really haven't doubled your income. i pay most of my taxes at the end of the year. the more you make the bigger the tax. i personally like paying more in taxes it means my income is up. A GOOD accountant is worth the money
funrider
Active member
do you income split?
polaris011
Active VIP Member
what i understand is that basically everything you gross you need to take 30-40 percent for taxes and thats just the way it goes ...i keep every recipt i get and try to use it as a right off whether its 5 bucks or 5 thousand
taxes suck and there is nothing we can do about it .... my dad always said you work from january till june for the government and whatever you make afterwards is what you get to keep!
taxes suck and there is nothing we can do about it .... my dad always said you work from january till june for the government and whatever you make afterwards is what you get to keep!
Yes, I am looking at it to and that's the ONLY way to go. If ch!t hits the fan, all your personal stuff is safe and you can even repo company assets yourself and make them untouchable. A good accountant is SO key. Mine screwed up my taxes so bad it's not even funny. Lucky CRA fixed them, saved me about $1,500 last year alone. They are reviewing my last years completely, and 2 years prior and likely will be seeing a lot more back as my accountant sucks and didn't do anything right.
You can write off things like vehicles, fuel, maintenance, meals, everything as long as it is realistic for the business. Even buying a new vehicle can be a huge write off. The key to less taxes is making the company make as little as possible on paper. Also if your only income is your company, things like paying yourself and paying a bit of personal income on it will lower taxes yet again. Yes personal tax rate is higher, but if in a lower bracket might be an advantage. Also, I can't remember the number but if you owe so much to CRA you are REQUIRED to make payments throughout the year, or they will take it out of your account themselves (and they are generous with the amount). One year my dad forgot and low and behold, CRA decided the quarterly payments should be $20,000 so they took it right from the bank account. You might get away with paying at the end of the year a few times but they will catch on and won't be nice about it, $3,000 oweing in taxes rings a bell.
I don't see how your not making any profit though after taxes? They will be lower, but there is no way it is none.
Wow glad I don't pay that much taxes......I complain if I pay a months worth of working in taxes and so far hasn't been that much 2011 shouldn't be that much either.
kbrunlees
Active VIP Member
The trick is you don't get paid by your company. you take out money as a director of the company. Make sure you keep enough money in the company to get you through the leaner times and don't forget to take time off and allocate mony for that. My wife and I have owned our own company for amost 15 years and have love every minute. I will not work for the man again, of course I got to be vice president of our company, any guesses who got to be president?
I don't think going corporate with your small business keeps you at a distance liability wise...a lot of finance companies today request you to make a personal gaurantee when you finance something....ie; you sign as the company rep and you also co-sign personally.
Where going corpoarate helps you, in my opinion, is a lower tax bracket which means you will pay less taxes but you will pay a LOT more on accounting fees vs personal taxes.
But I aint no accountant....and this is who you need to discuss this with.....get a good accountan...one who understands YOUR business.
I think what he means is getting sued etc work wise your house and personal assets can't be touched. Ya not likely to get financing on a brand new company.
yes but working at mc donalds an being a snow and mud consultant on everything does not pay well, one day you will get a real job and will find out what taxes are all about
Shitfly
Active VIP Member
I went as an AB ltd, company and payed myself and the wife in dividends as we are the directors, worked really well as the wife was not working another job at the time, more personal amount to take into our pockets. I beleive if you pay salaries/wages out of the company you will have to pay taxes etc quartley. I paid taxes once a year as only dividends were used. I have since gone working as an employee for a different oil company, but this was what I had done a couple years back.
I agree, you almost need to be a laywer these days to figure out what is meant in-between all the bullish!t!
Good luck!
I agree, you almost need to be a laywer these days to figure out what is meant in-between all the bullish!t!
Good luck!
steveo10
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Govt screws u over any chance they get, so give it right back to themPay your yourself the minimum to survive and let your company pay the rest. There's many tricks but I don't like to elaborate on a public forum. Just make sure your ducks are in a row when it's your turn for the audit
eclipse1966
Active VIP Member
like some previous posts said, incorporate yourself as soon as possible for several reason including tax breaks, minimize liabilities especially since you are in the construction industry. I am not an accountant but been self employed for 15 years so here are some suggestions:
- if you havent paid taxes your "profit" you indicated is not profit it is an operating expense. Maybe you need to evaluate your cost structure to make sure you make a salary after taxes are paid.
- pay yourself a monthly salary and take taxes off at that time.
- do your best not to draw any money other than your monthly salary until the end of the year end
- at year end if you made a profit after taxes, salary expenses etc etc take a dividend
- my advice to you is dont suck the company dry with your dividend. I take 1/3 of it, leave 1/3 of it in the company and balance 1/3 goes to employee bonuses or a company purchase of some sort. Keep in mind anything you leave in the company gets taxed lower than taking it out as a dividend.
- make sure you may your monthly employee deductions if you have any.
- also, take advantage of salary splitting with your wife if she isnt working or making little money
good luck!!!
- if you havent paid taxes your "profit" you indicated is not profit it is an operating expense. Maybe you need to evaluate your cost structure to make sure you make a salary after taxes are paid.
- pay yourself a monthly salary and take taxes off at that time.
- do your best not to draw any money other than your monthly salary until the end of the year end
- at year end if you made a profit after taxes, salary expenses etc etc take a dividend
- my advice to you is dont suck the company dry with your dividend. I take 1/3 of it, leave 1/3 of it in the company and balance 1/3 goes to employee bonuses or a company purchase of some sort. Keep in mind anything you leave in the company gets taxed lower than taking it out as a dividend.
- make sure you may your monthly employee deductions if you have any.
- also, take advantage of salary splitting with your wife if she isnt working or making little money
good luck!!!
KawisakiRider
Active VIP Member
I know paying taxes sucks but corporate taxes in Alberta are only 14% (maximum, with zero write offs) so its a lot better than paying 30-40% personal, imho.
I also do the dividend thing with my wife us being split 51%, 49% but if you have any additional income or draw a salary I would do as eclipse1966 said.
Like others have said a good accountant is worth their weight in gold.
I also do the dividend thing with my wife us being split 51%, 49% but if you have any additional income or draw a salary I would do as eclipse1966 said.
Like others have said a good accountant is worth their weight in gold.
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