Do You Need to Know Accounting to Start a Business

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If your budget allows, we strongly recommend hiring a professional to help you with accounting. Here`s how you can do it. For many entrepreneurs, accounting can be intimidating. You probably started with a great idea for a product or service, not for the day-to-day requirements of running a business, like accounting. To help you overcome this hurdle, we sat down with Ashley Christenson, Tax Manager at Tanner LLC, a local accounting firm, to get a glimpse into getting started with accounting for your business. Here are seven things she said you need to know. These terms are also just an introduction to business accounting. However, they will help you better understand how to do accounting for your small business – which we`ll look at next. Many business expenses are tax deductions – expenses that deduct from what you owe in taxes.

For example, if I spent $500 on a plane and attending a marketing conference, that`s $500 less than I owe in taxes for this year– The catch? To claim a deduction, you must record these costs. Starting a business often requires entrepreneurs to understand and perform a variety of business functions. An important business function when starting a small business is accounting. While many business owners are afraid to rummage through endless piles of financial documents, accounting often provides entrepreneurs with the clearest picture of their business success. Entrepreneurs must also keep detailed records of starting a small business for tax and legal purposes. In the early years, many start-ups will lose money. In this case, you probably don`t have to pay income tax, but you still need to file a tax return for your business. When you start making money, you need to start paying income taxes. This can come as a surprise if you`re not prepared for it. You want to know in advance so you can prepare for it.

“When you start making money, you put money aside for taxes,” Christenson said. The right accounting solution means you can invest more time in the business when accounting is no longer on your plate and potentially save the company money. A win-win situation! As a current or aspiring entrepreneur, it`s easy to get caught up in the most exciting aspects of starting a business: choosing a name, designing a brand, developing your product or service, and getting things done in general. Follow us on Instagram for more expert advice and stories from business owners. Once you`ve legally registered your business, you`ll need a place to store your business income. A separate bank account keeps records separate and makes life easier during tax season. Discover the basics of accounting, how you can better develop by developing an understanding of your company`s accounting. Check out the following accounting software that allows you to manage your books. Next, you should consider a business credit card to start building a loan. Loans are important to ensure financing in the future.

Businesses and LLCs are required to use a separate credit card to avoid mixing personal and business assets. You should start keeping records immediately after starting a business. Don`t wait, because you`ll regret it when you finally need those records, and you`ll be forced to find records and information that are no longer easy to obtain, Christenson said. Then you can consider hiring an accountant, either to handle all your accounting needs or simply to regularly check your records to see if something is wrong. “We all make mistakes, we are human beings,” Christenson said. Your company has four levels of verification of tax documents before they are sent to the IRS to make sure everything has been considered and seen by several people. As an entrepreneur, you must have an understanding of generally accepted accounting principles (GAAP). It`s not a rule, but it helps you measure and understand your company`s finances. Accounting is a constant task. Technically, you should do this every day, but we all know that life can get in the way.