Accounting Tips For LLC That You Should Know 2024

If you’re an LLC owner, then you need to set up a solid accounting foundation for your small business. Doing so will help you keep better track of your business’s expenses, future tax returns, and overall financial performance.

But this can all be tough to do if you’re a new business owner who doesn’t have much experience with small business accounting or business partners to provide support. That’s why we created this guide. 

It covers everything you need to know about small business accounting so that you can keep better track of your LLC’s finances without having to hire an expensive accounting firm. Keep reading to learn more about the accounting methods and tactics you may want to use as a small business owner.

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What Is Accounting?

Accounting is the process of reviewing business records and recording business transactions. The idea is to summarize your business’s income and small business expenses so that your LLC has clearer insight into its performance. This is an important part of running an LLC regardless of whether you have multiple owners or you’re a sole proprietor.

Companies use small business accounting for reporting purposes as well. Having a good bookkeeping system in place will make it easier to send financial statements proof to the Internal Revenue Service and any other agencies that request them, such as a bank that may request the information when deciding whether to offer your company a loan.

Read more: Top 6 Best Small Business Accounting Software In 2024 : Ranking And Reviews

Steps-By-Steps Guide To Do Account In LLC

Now that we know what accounting is and how it helps you keep track of business expenses, let’s look at some instructions for getting started. Here are three steps you can follow to start reviewing your business checking account and business savings account through accounting.

Open Separate Business Accounts

The first thing that you should do is open up a separate business account that’s not attached to your personal assets. Business bank accounts keep your business finances separate from your personal assets. That way, it’s easier to use your bank account data in whatever bookkeeping system or accrual accounting method you decide to use.

You definitely want a separate bank account for expenses and business receipts. But you may also want a savings account for long-term cash reserves. Keeping everything separate like this is good for your company’s financial health and will make it easier to get big value out of small business accounting software if you decide to use it.

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Choose An Accounting Method

There are two major types of accounting – cash accounting and accrual accounting. There are minimal pros and cons to using one over the other. The main thing is choosing one accounting methodology for your personal and business finances to avoid confusion.

The cash accounting method involves recorded income when you receive it and business expenses when they’re paid. The accrual method involves recorded income when it’s earned and business expenses when they are incurred.

You can choose whichever seems like a better fit for your LLC and its tax obligations. Many small business owners use both of these. The key is just making sure that you use one financial strategy in your financial reporting to avoid double-counting expenses or over-paying on income tax for your LLC or unincorporated business with personal accounts.

Set Up A General Ledger

The general ledger for your LLC is the accounting document that tracks income and expenses for small businesses. It will also commonly list changes in business assets, such as the sale or purchase of office equipment.

Having a general ledger is an important part of setting up the right legal structure for your business. It can play an important role in online payments, business taxes, and sales tax permit for your LLCs or sole proprietorship, among other flexible business structure benefits.

Accounting Tips For LLCs That You Should Know 2024

Alright, now we can start taking a closer look at strategies you can use as the tax preparer for your LLC to get more value out of accounting. Here are some tips you may be able to benefit from using.

Separate Business Bank Account

We wrote about the need to maintain a separate business bank account earlier, but it’s so important that it’s worth reiterating here. Having a separate account for your LLC will make it much easier to keep track of your company’s finances and pay self-employment taxes when the time comes. It may even improve your payroll system and save you money during tax time.

Read more: Tax Tips For LLC That You Should Know In 2024

Accounting Program

Next up, consider investing in accounting software for your LLCs. Cloud-based accounting software can be used by a sole proprietor anywhere. It can automatically prepare financial statements for your sole proprietorship LLC and identify your key tax obligations before the time comes to actually pay taxes. Software also offers plenty of automations that can save you time and money during the year and while filing taxes.

That being said, you’ll need to do some research when choosing accounting software to make sure you find the right fit for your business. For example, some programs may be better for cash accounting than others. You may also want to incorporate credit card accounts in your LLC’s accounting platform or maybe you work with independent contractors and want to be able to include their purchases of office supplies in your reports. These are all factors to consider while you shop.

Read more: The Best Tax Software In 2024: Which Is The Best?

Get Organized

Now it’s time to start getting organized. Try to gather all information about your bank accounts, business credit card, and potentially your personal income taxes as well. This can be a time-consuming process, especially since you may have to enter all of the data manually into the accounting platform your LLC is using.

However, once you’re organized it will be much easier for your LLCs to benefit from good accounting practices moving forward. You’ll have an easier time keeping track of sales tax, employment tax, and other LLC expenses after you’ve gotten organized.

Save Receipts

Now that you’re organized and using your accounting platform, it’s time to save receipts. Any purchase you make for your sole proprietorship LLC should have a receipt – even if you accidentally pay for it out of your personal account.

When your LLC saves receipts, it becomes much easier to calculate things like self-employment tax, possible deductions, and other important financial requirements as set forth by legislation like the Federal Insurance Contributions Act. Trust us, you’ll want to have this information on hand when the time comes to collect sales tax and pay taxes to the government.

Plan For Taxes

Now all that’s left to do is to make sure that your LLC is ready to pay its taxes when the time comes. This is why it can be helpful to create a business savings account. You can put your tax savings into these accounts so that you’re able to pay employment tax, income tax, and other types of taxes when the time comes to do so.

If you don’t plan for taxes, you could be hit with a large unexpected bill. That could create a situation in which your LLC’s viability moving forward is threatened. So save yourself the hassle by preparing for taxes early and saving the funds that you need to make payments now.

One other thing you should note is that your LLC may be responsible for sending pre-tax payments to the IRS based on the previous year’s tax bill. If your company has to do this, make sure that it keeps up with the quarterly pre-payments. Otherwise, it could face stiff fines and penalties that could eat significantly into your profits.

Read more: What Is The LLC Tax Rate In 2024? How Limited Liability Companies Pay Taxes?

What LLC Owners Should Consider In Doing Accounting?

Accounting is a really important part of running a successful LLC. But that doesn’t necessarily mean that you, as the owner of an LLC, need to do all of your company’s accounting work on your own. Many popular accounting platforms have plan options for multiple users. This can be a helpful way to get some assistance with key accounting processes from employees and other LLC owners.

You may also want to consider hiring an accounting professional. But this will typically only be the right move if you have a complicated accounting situation that you’re not sure how to resolve on your own. For standard accounting practices, you can usually get the assistance that you need from an online platform and its automated help solutions combined with customer service representatives.

Read more: LLC Pass Through Taxation: What Is It?

Conclusion

The bottom line is that every LLC needs a good accounting process in place to save time and money while also avoiding potential fines. The easiest way to get better at accounting is to choose the right accounting software. As you evaluate your options, be sure to choose a plan that allows as many users as you want without overshooting your budget.

We hope you’ve found this article on LLC accounting helpful. If you want to learn more, take a look at our other articles on creating and running LLCs.

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