How To Start Your Own Accounting Firm

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How To Start Your Own Accounting Firm

How To Start Your Own Accounting Firm

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After starting your small business, you will have to overcome the accounting tasks that come along with owning a store. While accounting may not be the most exciting part of growing your business, it’s important to start off on the right foot.

In this guide, we’ll cover everything you need to know about small business accounting, as well as some of the best accounting software to consider so you can move to the next step on your small business financial list.

Small business accounting is a set of financial activities for processing, measuring and communicating the financials of a business. These activities include tax, administration, payroll, procurement and inventory.

Accounting is something you should learn or outsource while running a business. Fortunately, learning how to manage your own book is possible, and there are some significant advantages to tackling it yourself.

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A separate business bank account protects your personal assets in the unfortunate event of bankruptcy, lawsuits or audits. If you want financing from lenders or investors, solid business financial records increase the likelihood of approval.

Start by opening a checking account followed by any savings account that helps you manage cash flow and plan for taxes. For example, you can set up a savings account and take a percentage of each paycheck as self-employment tax withholding. A good rule of thumb is to set aside 25% of your income, but higher income estimates may be closer to one-third.

Note that LLCs (see our state-specific guide for California LLCs, Texas LLCs, and Florida LLCs), partnerships, and corporations are legally required to have a separate business bank account. Sole proprietors are not legally required to have a separate account, but it is definitely recommended.

How To Start Your Own Accounting Firm

And as a new small business owner, you should consider a business credit card to start building credit. Credit is important for securing financing, as well as financing future large purchase orders. Corporations and LLCs must use a separate credit card to avoid commingling personal and business assets.

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Depending on the type of business transaction you make, different business credit cards have different benefits. If you plan to spend a lot on travel, for example, a business credit card that offers thousands may be ideal.

To open a business bank account, you need a business name and you need to register with your state or province. Check with each bank to find out what documents they require.

The foundation of sound business accounting is effective and accurate expense tracking. This is an important step that allows you to monitor the growth of your business, create financial statements, track franchise expenses, prepare tax returns and legalize your filings.

From the beginning, establish an accounting system to maintain receipts and other important records. The process can be simple and old school (bring the Filofax), or you can use a service like Shoeboxed. For US store owners, the IRS doesn’t require you to keep receipts for expenses under $75, but it’s good practice.

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Starting your home business is a great way to keep overhead low. In addition, you will be eligible for special tax exemptions. You can deduct the portion of your home that you use for business, as well as your home internet, cell phone, and transportation to and from work and to run business errands.

Any expense used partly for personal use and partly for business must reflect this mixed use. For example, if you have only one cell phone, you can deduct a percentage of the device you use for business. Yes often fall into this category as well. Gas mileage expenses are 100% deductible, just make sure you keep track of all records and keep a log of your business miles (where you’re going and the purpose of the trip).

Accounting is a high-level process that looks at the progress of a business and makes sense of the data that an accountant compiles into financial statements. As a new entrepreneur, you need to decide how you want to manage your books:

How To Start Your Own Accounting Firm

With so many paid and free accounting software options out there, you’re sure to find an accounting solution that fits your business needs.

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Small business owners also need to decide whether they use the cash or accrual method of accounting. Let’s take a look at the differences between the two.

Technically, Canadians should use the accrual method. To simplify matters, you can use the cash method throughout the year and enter a single adjustment at the end of the year to account for the dues and payments for tax purposes.

US business owners can use cash basis accounting if their revenue is less than $5 million, otherwise they must use the accrual method.

Most online stores start out as a one-man show. But as a small business owner, there comes a time when it makes sense to enlist outside help. To do this, you need to determine whether this person is an employee or an independent contractor.

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For employees, you’ll need to set up a payroll schedule and make sure you’re keeping the correct taxes. There are many services that can help with this, and many accounting software options offer payroll as a feature.

For independent contractors, keep track of exactly how much you’re paying each person. US small business owners are required to file 1099s for each contractor at the end of the year (you also need to keep their names and addresses on file).

Depending on your business model, you may plan to buy and import goods from other countries to sell in your store. When importing products, you may be subject to taxes and duties, which is worth noting if you’re running a dropshipping business.

How To Start Your Own Accounting Firm

If you import goods, a duty calculator can help you estimate fees and plan for costs in your own business. For more information on import taxes, visit the International Trade Administration (for US businesses) or the Canadian Border Services Agency.

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When sales start to pick up, you need a way to accept payments. If you’re a North American store owner, you can use Payments to accept debit or credit card orders. This saves you the hassle of setting up a merchant account or third-party payment gateway.

Payment You need a merchant account or you can use a third-party payment processor like PayPal, Stripe or Square. A merchant account is a type of bank account that allows your business to accept credit card payments from customers.

If you use a third-party payment processor, fees will vary. Some processors charge an additional conversion rate, typically 2.9% + 30¢ per transaction. Others charge a flat fee per transaction, while some have a monthly subscription model for unlimited financial transactions. You can consult this list to help you find a payment gateway that works for your location.

A business plan is often used to obtain financing, but many business owners feel that writing a plan is valuable even if they are not working with an investor. That’s why we’ve put together a free business plan template to help you get started.

You Operate Your Own Small Accounting Firm And Have

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The world of ecommerce has made it easier than ever to sell to customers outside your state and country. While this is a great opportunity for brands with growth goals, it introduces confusing sales tax rules that can cause headaches down the line.

How To Start Your Own Accounting Firm

When a customer enters a brick-and-mortar retail store, they pay sales tax regardless of the state or province where they made the purchase, whether they live in that city or visit anywhere in the world. However, when you sell online, customers are located in different cities, states, provinces and even countries.

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Canadian store owners only need to start collecting GST/HST when they have revenue of $30,000 or more in a 12-month period. You can submit the GST/HST you collect in installments. If you want, you can collect the GST/HST and include it in the input tax credit, even if you don’t earn a lot of income.

Selling to international customers is easier than selling domestically. Canadian store owners are not required to charge GST/HST to customers outside of Canada.

For small US businesses, sales tax has gotten a little trickier. You need to determine whether you are operating your business in an origin-based state or a destination-based state. In the past, you must collect sales tax based on the state in which you operate your business. The second requires applying sales tax based on the location of the buyer.

International purchases are tax exempt for US-based businesses. That

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