If you decide to get into small business and entrepreneurship, even if you just go with a sole proprietorship (non-incorporated) or small S-corporation like we do, you will have to deal with accounting and taxes. These two subjects are major time drains and it is not really something you think about when calculating your billable hours. It is work that doesn't earn you any money (unless you or your accountant work hard to find all your deductions, in which case it does pay to be diligent).
Now, you can throw all your receipts in a box and then hand it off to your accountant, but you have problems here. The major one is that your accountant doesn't
really give a hoot if you pay the maximum or the minimum amount. He will give lip service to finding you the best way to account for things but as a small business you're not paying much in fees - and you can expect about that sort of service in return. Want diligence? You have to pay for it and good accountants cost a pretty penny. Or you can do it yourself.
Which gets us to our point. I do all the accounting for our little enterprise. To some extent I enjoy it because it gives me a different way of viewing our business. But, it is also a pain in the butt. I use Quickbooks for invoicing, bills, and payroll, which does help significantly, but when you get into tax-line mapping and classifications and ledger entries for vehicle mileage and then for Pete's sake, North Carolina REQUIRES a depreciation schedule for small businesses, it is intensely time consuming. Just learning how to use the program correctly takes hours of practice and trial and error.
This year NC also wants to see how much of your gross was paid through online systems like Paypal. So you have to keep meticulous track of that. I hope you've figured out how to download reports and read them!
Again, this is not work that "makes" you money, but it can help save money by not overpaying or missing your deductions.
After I wrap up the business taxes I get the joy of moving onto our personal taxes. This is much easier as we don't have a bunch of rental property or massive trading outside retirement funds, and we use Intuit Turbotax. Between the two Intuit programs the cost does add up - Quickbooks advanced payroll subscription is $200+ a year and every three years they force a Quickbooks pgrade down your throat to continue using Payroll service. The alternative is calculating all your paycheck deductions by hand, which is possible, but after analyzing the time-value of money, not worth it (for me, it might be for you).
I pay Bri and myself a salary as employees of our business, as the IRS looks at S-corps and expects major shareholders that also are involved in the operation to draw a salary. The rest is paid out as dividends which is reported on a K-1. We also issue 1099s to contracting coaches.
I could get totally geeked out on this subject but if you ever have questions about small business accounting, I probably have a decent answer for you.
Yeah, so, the point is, learn you good some basic accounting if you are thinking about becoming an entrepreneur. It is more than just putting up a "open for business" sign.
