FAQs

WHAT IS BOOKKEEPING?

Bookkeeping is the logging, maintaining and retrieving of financial transactions for a business. Bookkeeping helps organize financial data, i.e. sales, purchases, payments, etc., to help prepare the financial statements. Company officers and owners use financial statements to review business information and make key operational and financial decisions. Bookkeeping helps ensure that financial records are up-to-date and comprehensive.

WHAT ARE THE TYPES OF BOOKKEEPING METHODS?

There are two types of bookkeeping methods: single-entry bookkeeping and double-entry bookkeeping:

The single-entry bookkeeping method allows bookkeepers to record transactions. However, this bookkeeping system focuses primarily on tracking expenses and revenue.

The double-entry bookkeeping method contains more information than the single entry method. This method allows bookkeepers to track: 

• Assets
• Equities
• Expenses 
• Liabilities
• Revenue

With this system, you’ll also monitor decreases and increases to the above categories as either a credit or debit.

HOW AND WHERE DO I SEND AN INVOICE? 

 Take your billing completely online, as opposed to mailing invoices.

Whatever procedures one may employ, take into account that the goal is to timely bill customers or clients and collect the money due to your company certainly within 60-90 days.
Before sending an invoice, double-check all the information to ensure it’s correct and clear. Let your client know how to make a payment and the due date. Make sure you send out the invoice on time. If you mail the invoice, ensure that your client’s correct address is on file. If you email the invoice, include a hyperlink to the payment system. This makes the process as easy as possible.

CAN YOU PAY YOURSELF A SALARY IN A C-CORP?

Officers of corporations can receive payment in the form of a salary. Shareholders that are employees can also receive a salary for their work.

Like officers in C-Corps, the salary received must be reasonable and not disguised as other forms of assets or dividends. 

In either case, wages paid as a salary can’t exceed the amount that someone outside of the C-Corp will receive as a wage. If so, there can be problems that violate reasonable compensation.

If the IRS determines that you receive an excessive amount of income, it can administer a reasonable compensation test. This can result in the excess salary paid to officers and shareholders converted to dividends that will experience double taxation.

DO ACCOUNTANTS HANDLE PAYROLL?

Accountants assist clients in the process of setting up the payroll with the respective states. Once completed, there are specific quarterly and yearly forms that need to be filed in order to stay compliant. The accountant will assess the client of any changes and timely file all required forms on a timely basis.

WHAT ARE BUSINESS ENTITIES?

Business entities are organizations formed to conduct business or engage in a trade. There are multiple business entity types, including corporations (C-Corporations and S-Corporations), limited liability companies (LLCs), partnerships (general partnerships, limited liability limited partnerships, and limited partnerships), and sole proprietorships.

DO I NEED TO DECLARE MY ENTITY WITHIN 75 DAYS?

Insofar as the use of the term “declare my entity”, it is assumed you are referring to the filing of an S corporation election or, a C corporation election. Generally speaking, there is a seventy-five day rule that applies to each tax election.

If you want the S -election to be effective from the date the entity was formed (entities are formed at the state level either by filing LLC Articles of Organization and corporate Articles of Incorporation), then you have 75 days from the date of formation to file the appropriate Federal election form.

There is late filing relief available for both elections. There are IRS Revenue Procedures issued to cover the requirements for late filing relief. Revenue Proclamation 2013-30 and 2009-41 deal with the S-election and the C election respectively.

 DO SMALL BUSINESSES NEED A WEBSITE?

While it’s not a requirement to have a website for your business, you’ll benefit from having a website for several reasons. 

Small businesses with websites benefit from transparency. Having a website can allow you to add more information about your business, its history, and what you’re trying to advertise.  

If you’re willing to invest in SEO, your website could potentially reach a much wider audience than you would if you didn’t use one. 

A small business website will also help owners create another method of sales. If your small business would like for customers to contact you, having a website will help you. It will also facilitate advertising your small business products.

HOW DO I GET A LICENSE AND PERMIT TO START A BUSINESS?

If you want to start your business at a state level, you’ll need a license and permit in many states. For more information about state licenses and permits, you’ll need to contact your city or county governments. 

The Secretary of State’s office typically oversees state licenses and permits. Depending on your industry, you may need a federal license or permit to operate your business.

 HOW DO YOU START A BUSINESS?

Everyone has their own way to approach starting a new business. However, everyone living in the U.S. is also obligated to align these procedures within the jurisdiction of the state the business is starting in. Business owners must follow federal, state, and local rules.

Some simple steps to follow include:

1. Do your research
2. Make a plan
3. Plan your finances
4. Speak to a professional to advise on your plan, business entity, tax election, and more
5. Choose a business structure
6. Pick and register your business name
7. Get licenses and permits
8. Set up the location of your business, or start your website, or both
9. Choose an accounting system
10. Promote your business

DO I HAVE TO FILE END OF YEAR TAXES IF MY BUSINESS MADE $0 THIS YEAR?

Corporations must file a tax return each year, regardless of whether their taxable income is zero or $1 million. A corporation may face penalties for not filing, even if it doesn’t have a single transaction to report. A regular corporation, referred to as a C corporation, would file Form 1120.

An entity that is taxed as an S corporation must always file its initial tax return with the IRS, even if it had no business activity to report.

An entity that is taxed as an S-Corporation files its Federal return on Form 1120S.

Whether an LLC has no activity and has to file depends on the tax return being filed. If the LLC is a single-member filing a Schedule C or, has elected to file as a partnership, if there is no activity then no Federal return would be required to be filed. You would only file a return if you claiming tax deductions on a return, even if there was no income to report. Certain states may require an LLC return filing, even if there was no activity. The state of California would be an example of a state that would require the filing of a return and the payment of the LLC fee.

 DO I HAVE TO FILE ESTIMATED TAXES?

The need to make estimated tax payments is solely based on the taxpayer facts and circumstances. If your income is entirely comprised of wages, there will be withholding taxes taken out on your wages, so there should be no need to make quarterly estimated tax payments.

If there is material income from other sources and no withholding taxes are taken out, then the need to make estimated tax payments has arisen. Tax projections can be prepared to determine the level of estimated taxes that are necessary for you to make.

The quarterly estimated tax payment dates are April 15th, June 15th, September 15th and January 15th of the succeeding calendar year.

ARE MEDICAL BILLS TAX DEDUCTIBLE?

Medical bills are tax-deductible if the taxpayer itemizes and does not elect to take the standard the deduction. In 2019, the IRS allowed all taxpayers to deduct the total qualified unreimbursed medical care expenses for the year that exceeds 7.5% of their adjusted gross income. Beginning in 2020, the threshold amount increases to 10% of Adjusted Gross Income (AGI).