Updated: Oct 15, 2019
Each of us at FiveWhyz uses an accountant, but this is an optional step. We use them for a couple of reasons:
To help with taxes when that time of year comes around
To advise us on setup so we maximize the tax advantages we can get as a result of owning a business
For us, this is a trade-off. While we could try and do it all ourselves, the reality is that a good accountant will more than pay for themselves.
What you are looking for is not just a pure accountant. You want to find someone who can help you understand the various options of running a business and how to maximize your money. You want someone who will offer suggestions and not just help you count dollars. For example:
You will probably be interested in saving for your retirement. The way this works is that you will set up something like an SEP-IRA (this is not a normal IRA). The IRS has rules associated with how much money you can contribute to these vehicles and it is based on how much you pay yourself. This means that you will need to set a payroll payment from your LLC to yourself, so you can contribute to the SEP-IRA. But the really good news is that when you do this it is treated as a business expense and so means that the business won’t be taxed on this amount. And this is why the IRS has rules to say how much you can set up this way. A good accountant will help you navigate these waters.
You will find that if you don’t follow taxation rules to the letter, you will end up being fined. Sometimes it seems like you will be fined for rather strange things. For example, I once got fined for paying my taxes early (I kid you not). A good accountant will help you navigate these waters and ensure that you have a smooth schedule for payments.
You will probably be interested in health care coverage for you and your family. This is a pretty fraught area in the US - coverage for a single family has no economies of scale for the insurance companies and so it is very expensive. Again, your account should be able to help set this up so that it is at least treated like a business expense.
There are two basic approaches to finding an accountant:
One of the big boys: HR Block in particular seems to offer services for small businesses.
Local accountant: Find an accountant who deals with small, professional business such as lawyers and has knowledge of working professional issues across state borders. An example is Melvin, Bibb, & Segars
Once you have selected an accountant, ask them about what accounting software they like to use. Sometimes there is will be a strong preference for a particular tool, so you’d be advised to consider using that tool as well.
By Way of Context ...
You are looking at a part of a series of blog posts. The series looks like:
And remember, I am not an accountant. I am not a lawyer. You will want to get help from these experts and should defer to their opinion in the event that what you read on this page differs from their opinion.