In this episode, I offer a few simple online business accounting tips that will help you decide how important it is to register your own corporation, open a business bank account and buy business accounting software like Quickbooks or Freshbooks. These are questions I get all the time, and they are fresh in my mind as I crank up my drop shipping business, which will have a big impact on how I handle my accounting.
I also mention the fact that my buddy Cliff is about to start another Podcasting A to Z class.
Online Business Accounting Tips Show Notes
Should I form a corporation?
In terms of taxes, there is no big impact as most of us are part-time entrepreneurs and we are not making millions of dollars a year with our side businesses. Even if you form an LLC, what’s just going to happen typically is that you will file your normal tax forms, place a schedule that describes your business and pay something like your regular income taxes on a monthly basis. Once you are making more money though, consult a tax attorney to understand what’s best for you in your business.
If you are a new entrepreneur, you get tangled up with all these financial questions about whether or not you form a corporation and all that but what you really need to focus on is creating value. Printing business cards, working on graphics for your website footer, forming corporations are just going to distract you from the business of getting out there and creating value that people will pay you for. This can wait until you are making money.
Why is it important to keep finances completely and totally separate from your personal finances?
Go down to your bank and inform them that you will start a new business so you will need a separate checking account and saving accounts and only use these things in your business. This goes to say in your PayPal account and your credit cards. On a monthly basis, this also makes it easier for you to tally up all your expenses and income and understand whether or not you are making money in your business. If you have a business, treat it like a business wherein you have some kind of profit and loss analysis.
If the time comes that something bad will happen to your business and you are in a legal situation where someone is suing your for money, keeping your personal and business finances will help you in terms of liability protection.
What do I do about bookkeeping?
Get started with an excel spreadsheet. Some people do not even recognize the problem until it is tax time and they dig out all receipts so they can show expenses off of the income they have generated for the year. Start with excel or other online tools but if this is not something that you are comfortable doing, get a bookkeeper to periodically collect your information and do all the things necessary to keep your books current. There are virtual bookkeepers who you can tap.
If you are going to file an income tax as a business, you are going to file a schedule along with your income taxes and one important piece of this is a chart of accounts. If you are going to do your books yourself, pay an accountant additional money to help you set up a proper chart of accounts. In this way, when your business is small, you can use a properly constructed chart of accounts on your own and when it grows you can just hand it off to a trained accountant.
Links Mentioned In This Episode
- Cool article on 15% unknown searches in Google
- The Late Night IM Facebook Group
- 100K Factory program (drop shipping)
- Procrastination Tips (last week's show)
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Online Business Accounting Tips Episode Transcript
I hope you have been having a fantastic week. I hope you caught last week’s episode and that helped you eliminate some of the procrastination that maybe you’ve been dealing with in your life. If not, I want to strongly encourage you to go back and check out last week’s show. I’ve had lots of positive feedback on that. It is currently the most popular episode for this podcast on iTunes.
This week we’re going to talk about some general internet business finance stuff. Not the boring stuff, we’re not going to get into details about charts of accounts and all that kind of stuff, because I’m not an accountant and I don’t play one on TV. But, it is a common question that people have about their internet business, “What should I do about my money?” So we’re going to talk about that this week.