Control Your Tax Bill and Increase Your Profits

This is optimistic — how many of us can control our tax bills? We don’t have a lot of control over how the authorities tax us, but having said that, there are legal steps which can be taken to reduce income taxes.

What I am talking about today is incorporating a profitable business, filing on time and paying on time.

The Story

Sarah was a very successful contractor. Her carpentry business was showing a profit of $350,000 this year. Tragically Sarah was a better contractor than business owner and she had not yet gotten around to incorporating this business.

Sarah was going to pay tax on $350,000 personally which was going to be more than $150,000. If she had incorporated, then her tax bill could have been less than $50,000.

This post is not about incorporating and there are a number of considerations besides the tax savings. But if a business is very profitable then it is likely incorporated. You do not see a lot of multinational proprietorships. There is a transition in business from proprietorship to incorporation to holding companies and then maybe the business goes public.

Consider Incorporation If Your Business is Profitable

The corporate tax rates are lower than the personal tax rates. This is a fact. If…