Do you have a lot of questions? Don't worry, you aren't alone. Check out these frequently asked questions and their answers.
Do I really need bookkeeping services? Yes. You know that pesky tax return thing you have to file every year? When you file that, you have to know how much money you bring in, how much you have in expenses, and what you're left with (that's called profit). The government then takes their share of the profit and calls it taxes. You need to hire a bookkeeper to make sure your transactions are accurately classified because the government doesn't appreciate when you understate your profit (which results in not paying enough taxes) and you don't appreciate when your profit is overstated (which results in you paying too much in taxes). So do yourself a favor and hire a bookkeeper so you can feel confident your profit is accurate and everyone is happy. You also need bookkeeping services if you have employees or have the S Corp election and need to run payroll. In addition, most products and some services are subject to sales tax. The rules are different in each state and can be complicated. A bookkeeper can help you with this service. There's also many other benefits to having a bookkeeper.
What is monthly bookkeeping? Bookkeeping is categorizing all money in and money out, often referred to as classifying transactions. It can be done weekly, monthly, quarterly, or yearly, but I recommend at least monthly. Why monthly? Having accurate and timely data is crucial for making financial decisions based on fact, not assumptions. When looking at your numbers regularly you become proactive instead of reactive. You don't want to be the business owner who thinks they have an idea of their profit but then at the end of the year have a rude awakening. When you engage in my monthly bookkeeping, you will get reports delivered to your inbox by the 15th of each month.
Should my business be formed as a Sole Proprietor, LLC , or S Corp? Let's first define the three: Sole Proprietor - An unincorporated business owned by an individual in which there is no distinction between the owner and the business. LLC - business structure that is filed with a state in which the business is a separate entity than the owner. S Corp - an entity which elects to be taxed as a corporation. The entity must first be formed as an LLC. A big benefit to being a Sole Proprietor is the ease of forming it. This type of business essentially doesn't require anything besides business activity to be considered a Sole Proprietor. The disadvantage is the lack of protection. Anyone that does business with you can sue you for any reason and can take your personal assets such as your house, car, bank account, or even your retirement. The benefit of having an LLC is the protection it provides. If a client decides to sue you, they can only go after your business assets and not personal assets. Forming an LLC does require filing it with the state, but this is a fairly simple process. Electing to be taxed as an S Corp is very beneficial once profiting a certain amount. This election can save you thousands in taxes once you are at a certain profit level. Generally speaking, if you are profiting at least $50K you should be talking with a CPA about the benefits of making this election.
What is the difference between tax preparation and bookkeeping? Tax Preparation Services: A tax professional will request your books and other supporting documents to report what occurred in your finances to the IRS and state during the past year. Tax professionals specialize in tax law compliance. Bookkeeping Services: This entails categorizing income and expenses, reconciling all accounts to ensure accuracy and completeness, and printing financial reports to analyze the health of your business. Bookkeeping is more detailed than tax preparation. It provides you with a clear view of your finances, catches errors, and allows you to be stress free when its time to hand over your books for tax prep. No more stressing for hours on end compiling every crumpled receipt you can find. In Summary, you need both bookkeeping and tax preparation as they are separate services that work complimentary to each other.
Can you file my taxes too? No. I don't file taxes. Having both a bookkeeper and tax accountant is beneficial. Not only will you have two sets of eyes on your numbers, but a bookkeeper also helps you understand your numbers in a more intimate way.