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Tax Suggestions for Business Ownersin Calgary Tax Saving for Business
Business owners preparing to file their taxes should always plan ahead. Having an idea of what your year-end numbers are going to look like will give you the chance to see what your potential tax bill may be. This way, if you owe tax, you can work with your financial team to plan accordingly.
Many small business owners debate the idea of whether or not they should incorporate. This decision depends on a variety of factors, including financial ones. The question is often whether or not there will be enough money earned by the business to justify leaving some in the corporation, rather than just pulling it out to use personally. The financial benefit to doing this is that money left in the corporation will be taxed at a lower rate than if it was pulled out and taxed at your personal income tax rate.
Like most Canadians, it is typical for business owners to have some form of personal debt. If you have a sole proprietorship or a corporation, you should ensure that you have a line of credit set up as well. This will be a secured line of credit that is guaranteed by your home equity, and will help to keep your interest rate low. Business owners can use this line of credit to pay for business expenses, rather than cash from their bank accounts, which can then be used to pay down non-deductible debt. Many people may be reluctant to add a line of credit during the year, but in the long run it frees up cash that you can put against things like your mortgage, which ultimately evens out your position at the end of the year.