

Ask HN: How do you manage taxes for your startup/consultancy business? - stevefink

Like many individuals that frequent HN, I work as a consultant full time and use the money I earn to support my family and work on an ambitious startup project on nights and weekends. After little consultation, I decided that a single member LLC is the way for me to go in as far as forming a corporate entity to protect my assets and maximize on my tax write offs.<p>Being someone who's worked as a W-2 employee his entire life - I am clueless with how to manage my taxes. I'm used to just getting a ton of money removed from each paycheck and paying someone $100 a year to just do my return for me.<p>Things I am doing to prepare myself as a 'business owner' is setting aside 35% of my gross into a savings account, assuming that's going to federal taxes. I opened a business checking and a business credit card that I use solely for organizing expenses that I <i>think</i> are businesses expenses. I also just started reading some highly recommended books (which I'll list upon request, but I don't want this thread to seem like a promotional one)<p>I plan to use my LLC not only as a consultancy but also to do business as my startup until/if the startup gains enough traction to open its own LLC, I can't justify the costs right now at this stage.<p>I do have a certified CPA that deals with corporate tax that is consulting me. I feel it's not enough. I wanted to reach out to the HN community to see how do you deal with your taxes? What tools/suggestions/tips and tricks can you suggest so I can maximize on my return? How do you track your expenses? How do you plan what you are doing for your startup/consulting shop in as far as spending goes?<p>The less time I have to spend thinking about and working on taxes, the more time I can spend on building great products.<p>I was naive in originally posting this - I should make note that this probably applies to those in the United States only as taxes are handled differently in other regions of the world.
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pzxc
I am not an accountant, this info is presented for entertainment purposes
only, take my advice at your own risk, blah blah blah.

I also run my business out of a single member LLC. Quickbooks for bookkeeping,
Turbotax for taxes. All business income/expenses must go through the business
bank account. Only business income/expenses must go through the business bank
account. Keep all invoices/receipts in a folder, enter them into quickbooks at
month end, reconcile with bank statement. Once you make a profit (and thus
have a tax bill), you will have to start quarterly payments of your taxes. The
amount is based on how much tax you paid in the previous year. Basically when
you file your taxes, along with the tax return, Turbotax generates 4 payment
slips for the quarterly estimates for the next year, which have to be mailed
to the IRS (but payable to the US Treasury) approx every 3 months, there is a
due date on each.

A single member LLC is a passthrough/nonexistent entity according to the IRS,
meaning there is no "business tax return", everything shows up on your taxes
with an attachment (schedule C I think?) for business income/expenses. You'll
have to pay both the employee and employer portion of social security
medicare, so your taxes will seem higher than an employee's would, but just
because the employees don't see that extra portion doesn't mean they aren't
paying it -- trust me, their employer considers it part of the cost of
employing them and no different than their salary/benefits.

Depending on how many transactions you have, it may be worth it to you to pay
for a bookkeeper and/or accountant (they are not the same thing). Most of the
time I have less than 10 deposits/expenses per month (even though my business
is my primary source of income, I am ramen-profitable and keep things simple)
so I just do it all myself. 10 minutes once a month to keep quickbooks up to
date, an hour once a year to do the tax return, and 4 trips to the post office
per year to mail the quarterlies.

Regardless of who you hire or don't hire to help you with the bean counting,
one thing you never ever do is let anyone but yourself sign checks. Unless, of
course, you consider embezzlement to be philanthropic in which case go for it.

I am not an accountant, this info is presented for entertainment purposes
only, take my advice at your own risk, blah blah blah.

