As a small business owner, you have a lot of accounting and tax obligations. You need to choose the right business formation, pick an accounting method, track expenses, and report your finances to the government.
To help you out, we’ve put together a general guide on accounting tips for entrepreneurs and small business owners. In this post, we’ll cover topics like:
– Business formation (sole proprietor, LLC, S Corp, partnership, etc.)
– Choosing an accounting method
– Picking your bookkeeping method
– Expense tracking tips
– What are my tax obligations?
– Financial reporting for the new business owner
Legal business formation is an important first step for any small business owner. The type of business entity you choose will affect your tax obligations, so it’s important to choose wisely.
There are several different types of business entities, including sole proprietorships, LLCs, S corporations, and partnerships. Each has its own advantages and disadvantages, so it’s important to do your research before making a decision.
Choosing an accounting method
Once you’ve chosen a business entity, you’ll need to pick an accounting method. Accounting methods include cash-basis accounting and accrual-basis accounting. Cash-basis accounting means that you only record transactions when cash changes hands. Accrual-basis accounting means that you record transactions when they occur, regardless of when the cash is exchanged. Again, each has its own pros and cons, so be sure to consult with an accountant before making a decision.
Picking your bookkeeping method
After you’ve chosen an accounting method, you’ll need to decide how you’re going to keep track of your finances. There are several different bookkeeping methods, including double-entry bookkeeping and single-entry bookkeeping. Double-entry bookkeeping means that you’ll keep track of both your income and your expenses in one place. Single-entry bookkeeping means that you’ll only keep track of your income or your expenses in one place.
Expense tracking tips
Once you’ve chosen a business entity and an accounting method, you’ll need to start tracking your expenses. This can be done using software like QuickBooks or by hiring a bookkeeper.
There are several important expense categories that you should track, including:
– Advertising and marketing expenses
– Travel expenses
– Employee salaries and benefits
– Rent or mortgage payments
What are my tax obligations?
After you’ve chosen a business entity, an accounting method, and a bookkeeping method, you’ll need to start paying taxes. The type of taxes you’ll need to pay will depend on your business entity. For example, sole proprietorships are subject to self-employment tax, while LLCs are subject to income tax.
Financial reporting for the new business owner
As a new business owner, you’ll also need to file financial reports with the government. These reports include your balance sheet, income statement, and cash flow statement. Again, the type of report you’ll need to file will depend on your business entity.
There are many different aspects of accounting that small business owners need to be aware of. By following the tips in this series, you’ll be able to stay on top of your finances and avoid any surprises down the road.
Do you need an accountant or business advice? Search our directory of accountants in San Antonio, Texas.