Fictional Figures
Employee Ed is employed under a big company. He gets benefits and dental.
Works for a day rate of $630. On top of that me makes a flat year salary of $40,000.
Business Bob is self employed.
He makes a flat rate of $780 daily for the same work.
Lets say a typical work year is 220 days. Employee Ed makes $178,000. Business Bob makes $171,600.
Using Alberta rates:
Provincial Tax: 10% of taxable income - $17,800
The using the tax calculator here Ed would pay $28,800 on Federal Tax also.
$178,000 - (17,800 + 28,800) = $131,400 income, $46,600 in tax.
How would Business Bob expect to fare in comparison?
Can someone break down how he could best set up his business (paying himself a minimal wage while keeping maximum money in the business etc.) to maximise his income.
I don't know if this is a really basic scenario or not but I would really appreciate some analysis on this kind of scenario. I see the self employed business set up being promoted on here a bit and I want to possibly make the switch. I just picked these figures (which are not unrealistic for Alberta).
Also can things like your apartment/further education/dental be wrote off. How creative can accountants really get?
Thanks for any feedback in advance.
Employee Ed is employed under a big company. He gets benefits and dental.
Works for a day rate of $630. On top of that me makes a flat year salary of $40,000.
Business Bob is self employed.
He makes a flat rate of $780 daily for the same work.
Lets say a typical work year is 220 days. Employee Ed makes $178,000. Business Bob makes $171,600.
Using Alberta rates:
Provincial Tax: 10% of taxable income - $17,800
The using the tax calculator here Ed would pay $28,800 on Federal Tax also.
$178,000 - (17,800 + 28,800) = $131,400 income, $46,600 in tax.
How would Business Bob expect to fare in comparison?
Can someone break down how he could best set up his business (paying himself a minimal wage while keeping maximum money in the business etc.) to maximise his income.
I don't know if this is a really basic scenario or not but I would really appreciate some analysis on this kind of scenario. I see the self employed business set up being promoted on here a bit and I want to possibly make the switch. I just picked these figures (which are not unrealistic for Alberta).
Also can things like your apartment/further education/dental be wrote off. How creative can accountants really get?
Thanks for any feedback in advance.