Disclaimer: Please note this article is not financial advice. The purpose of our blog is purely educational, so please consult a professional accountant or financial advisor before making any financial decision.
Home to about 14 million people, Ontario is the center of Canadian culture and economy. It's located between two of the country's prime cities, Ottawa and Toronto, and its common industries are related to machinery, cars, and electrics. However, because of diversity, you'll see almost all types of businesses here.
If you're one of the successful business owners in Ontario, this article will give you a few ideas on how to spend your Ontario after-tax earnings, regardless of your line of business.
After-Tax Income And The Ontario Tax Income Amount To Pay
After-tax income is the money you get by subtracting the taxes you need to pay from your net income. To determine your taxable income as a business operating in Ontario, check the Ontario tax income brackets first and see your tax rate. The higher income you have, the higher your income tax. The way you compute your personal income tax using the tax bracket is the same as how you'll compute your federal corporate tax.
You can then deduct this amount from your current income. You'll get your business profit or the company extra money, which you can use in different ways. What ways? Check out the five brilliant ideas below.
Invest in your people and yourself.
Your company's greatest assets are your people. Despite the high dependence on machines, nothing can replace human passion, intelligence, innovation, and connection. So, reward your employees, especially the top performers and contributors, by offering additional benefits or skills and personal development training.
This human asset also includes you as the owner and manager. If your business is earning, reward yourself, too, either through a salary or by equipping yourself with knowledge about operations and people management so you can handle your business better. If your company has shareholder ownership, you can use the eligible dividends method.
Business development and expansion.
Developing your workplace— either the place itself, your business processes, or your market— positively affects your workforce by boosting their morale and trust in the company. So, this is another perfect idea where you can spend your profit.
Expand your customer reach by marketing more. You can also expand your product line and sell more products. In both situations, make sure to strategize to ensure the return on investment. Finally, you can make your employees' lives easier by investing in new office equipment and software.
Grow your team.
Business development comes with new software and office tools and by adding new skilled members of the team. Check out which parts of your business need help, and self-reflect on the capabilities you are good at and the tasks you should delegate to experts. For instance, you can delegate the technical task of bookkeeping and accounting to Certified Public Accountants. Search engine optimization is also a specialized skill you can outsource to specialists. Your investment in new hires who will assist you with difficult tasks will be worth it in the long run.
Pay any debts and taxes too!
A lot of businesses are built with loans from banks or from family and friends. If your business owes some people and entities, it is a wise decision to slowly pay on your debts first before any business expansion to avoid interest piling up and for you to run your business clean from loans. You may also pay your taxes in advance before the yearly deadline so that you have visibility to your after-tax income right away. Besides, you can always have income tax e-filing help from accountants.
Put the money in the bank.
Lastly, the best way to spend your profit is— not to spend it at all! Know how much costs your company has every month, and make it a goal to save profit to ensure that you can run your business for a solid six-month period despite low sales and any challenges on income. Through this, you’ll be able to pay all company expenses, especially employee salaries, even during non-peak seasons.
Final Reminders For Businesses In Ontario After Tax Income
Isn't it great when you can spend your hard-earned profit back at yourself and the people you worked with to achieve success? You can expand your business for more sales and, hopefully, more profit too. When the company is good, the cycle of giving back and expanding goes on.
Make sure to always rely on data with each of your business moves and often check your profit and loss statement. Doing so will ensure you do not overspend or put your business's financial capability at risk. If you need professional services accounting to get reports and manage your taxes to get accurate after-tax income, we at Unloop, are just a phone call away at 877-421-7270. We'd love to assist your business in Ontario, anywhere in Canada, and in the US!