Frequently Asked Questions

Are you expecting to generate a substantial profit this year? It may be time to consider forming an S-Corp. By doing so, you can begin paying yourself and alleviate some of the tax burden. Without this setup, you would be responsible for paying self-employment taxes on the entirety of your business income. However, with an S-Corp, taxes can be paid through your W-2, potentially reducing your overall tax liability. It’s important to note that the business structure itself doesn’t change; if you were previously operating as an LLC, you will still be an LLC after electing S-Corp status. This business classification is solely defined by the IRS tax code.

It’s important to keep personal and business accounts separate to ensure accurate tracking of business expenses. By maintaining separate accounts, you reduce the risk of claiming personal expenses as business expenses, which can lead to potential issues during tax preparation. Additionally, keeping accounts separate allows for clearer financial management and proper identification of business-related transactions

You should consider using accounting software immediately, as it’s always better to start when everything is at its easiest. Even if you only have two or three transactions, you won’t have to worry about catching up as you get busier because you already set it up. As Charles Spurgeon said, “Begin as you mean to go on, and go on as you began,” and this holds especially true for a new business.

The timing for outsourcing your bookkeeping services depends on your individual situation. If you find bookkeeping overwhelming or if you simply dislike dealing with numbers, it might be the right time to have someone else take over. If you feel that bookkeeping is becoming a burden and is taking time away from focusing on your core business activities, outsourcing could be a valuable solution. It’s important to assess your own capacity and comfort level with bookkeeping tasks and consider outsourcing