One of the biggest mistakes a new business owner can make in my opinion is to not use an accountant. Why you might ask? Most of us are good at many things, we have talents that serve us well. Some of us are good at math and numbers. Some of us are not.
I wouldn't diagnose myself with a medical condition and treat it because I am not a doctor. So, why would I do my own accounting and taxes if I am not an accountant? The answer is I wouldn't, and you shouldn't unless you are an accountant. But then isn't that like a doctor prescribing for themself? Never a good idea!
When you start and run a business, you need to be focused on the day-to-day activities to make your business profitable and efficient. I spend time every day checking my accounts and coding things for easy access to expenses, salary, taxes, etc. But I do not do my own accounting. I do the bookkeeping so that my accountant has organized, correct information to do her job. You do need to know what is happening financially at all times with your business. You need someone to call or text to ask questions when you are not sure. Using an accountant does not mean they make the decisions. It means they advise you of tax law and you make well-informed decisions for your business.
What you should never do with your business is let someone do your taxes and just sign without understanding what has been done on your behalf. This is a recipe for disaster. You are still responsible legally for your business
A professional accountant that is conservative with deductions is far more likely to keep you out of tax trouble than doing it yourself. They know the laws, legal deductions, depreciation schedules, and more. I have better things to do than research tax laws and how they apply or don't apply to my business. A good accountant that you have a good business relationship with is worth their weight in gold.
I use a bookkeeping method called Profit First. Read a book by Mike Michalowicz "Profit First". An easy method to always know where your money is but most importantly where your profit is. Most accountants use "Generally Accepted Accounting Practices" Profit & loss statements, which most of us regular folks don't understand, and Balance sheets, again most of us don't understand them. Profit First is simple, straightforward, and focuses on profit. The book is also available on Audio from Amazon Kindle.
I would recommend that you interview accountants to find one that you are comfortable with. This will be a relationship where the accountant knows alot about you. You will need to be honest and speak freely about finances with this person. I found my accountant through a trusted friend that has used her for 7 years. She came highly recommended. When I met her I instantly liked her approach and felt very comfortable with her. She gave me a two-page form with what deductions are legal, explained how to fill out the form so she could do the taxes. Christina is also my registered agent. She does this for FREE as part of her reasonable yearly fee. Registered Agent fees could have cost us from $40 to $360 / yr depending on which one of the other places you chose to do that for you. A couple were annual $49 and even $39 while some were $29 / mo! You need a registered Agent with an LLC. Look for an accountant that will do that for free.
What is a registered agent?
"An LLC registered agent is an individual or entity which has been designated by the LLC to receive service of process notices, government correspondence and compliance-related documents on behalf of the LLC.
The registered agent for an LLC has one primary function: to be an agent for service of process, as well as receiving other important correspondence on behalf of the LLC. Additionally, a registered agent must also forward such materials to the LLC in a timely manner."
I mentioned before that you need to be able to call or text with questions. This is particularly important when registering your company. (More on that in another post) There were several things during that process that I had no idea how to handle. A quick text... a quick answer! Viola!
A Word on Accounting Fees...
Early on in my first business, we retained an accountant. The fees were fairly reasonable when we started. As time went on, the fees began to "Creep" up. The fees seemed to creep up each year until we were paying a very large sum of money for the same work they always did. We received a large envelope with the Profit Loss Statement, Balance Sheet, and other documents we didn't understand. Sadly they went into a drawer to rest peacefully. Because we used "Bank Balance" accounting, which works like this... Look at your bank balance, do I have money? Yes? Ok, I can spend. NO? Ok, I can't spend. We truly had no idea if we were truly profitable. The accountant would tell us each year "you made "X" amount of profit, or you had "X" amount of loss. We had no idea where the supposed profit was or why we had a loss. Profit First ensures you will always know where the money is or went. Your accountant doesn't care how you manage your money as long as they get the information they need to do the legal stuff for you. If you see "Fee Creep", it is time to start searching for a new accountant.
Some accountants charge monthly. This is a decision you will need to make. I chose to go with a yearly fee no monthly reports. because again with the Profit First method, I always know where my money is.
So, in closing...
Ask your friends that have businesses who they use for their accountant. A trusted friend is a good place to start for information.
Interview the accountants that you are considering.
Be sure they are available for quick questions and responses. Nothing worse than waiting days for an email answer.
I suggest they be local to your area. Being able to go to the office and have a consult is important.
The consult should be free!!!
Ask what their fees are, and be sure they won't break the bank and are reasonable.