
Ask HN: How do you track your finances at a fledgling startup? - myflash13
Anyone mind sharing their workflow for managing their personal and small business finances (and keeping the two separate)? Do you just transfer money from your personal account to your business account, record it as an investment on your personal tax filing, and record it as income on the business account?<p>Also, apps:<p>I&#x27;ve been using YNAB for my personal budgeting, and it works well for me. I guess I could just use another YNAB budget file for business expenses, but I was wondering if there was a more suitable app (I have no idea what to look for - perhaps easier tax filings?)
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patio11
Ahh bookkeeping.

There are some subtleties here depending on your corporate form and where you
are located. With a pass-through entity like an LLC, the typical way you do
things is to physically transfer money from your personal checking account to
the business account and record that as a "member contribution."

This. Is. Not. Income. You will, under almost no conceivable circumstance,
either want to or be obligated to recognize it as revenue of the business. It
will not be taxed.

In an LLC, moving money from the LLC to your personal accounts is a "member
distribution" and works the same way.

You might wonder if a member distribution is income, and the answer is "kinda
orthogonal!" In the main, the LLC will be throwing you cash that is actually
income, but there are ways (like e.g. running a balance on the business'
cards) where the business can be transferring you money in excess of its
actual revenue. This is why you have good books; you want to be taxed on
revenue, not on cash flow. (Paying income tax on $25k which you borrowed from
a bank and have to repay the full amount of would be gratuitously unfun,
right.)

In terms of keeping all of this straight, you should use bookkeeping software,
a bookkeeping service, or a bookkeeper. I have an opinionated choice here: use
Bench (bench.co). They're nothing short of lifechanging for me. I did all my
own books for ~8 years and suffered enormously from that; I have had amount of
bookkeeping-related suffering decline to virtually 0 after using them. [+]

In the case where you're running a non-passthrough entity, your contribution
could get counted as some sort of capital or perhaps a loan to the business.
Either way, get it in writing; you'll need it both for substantiation purposes
and to make other stakeholders in the business (investors, tax agencies, etc)
happy.

Your books will generally be used by your accountant or yourself (assisted by
tax preparation software) as an input into your tax filing (and/or tax
planning) processes.

[ + ] Literally in the past 24 hours my Bench books caused me to trivially
catch an accounting firm from making a $50k error on my Japanese taxes. (Not
$50k of net tax impact, but they botched a box by $50k, in a fashion which
would have required an expensive remediation next year.)

~~~
myflash13
I really appreciate the detailed write-up and the Bench.co
recommendation...exactly what I was looking for.

