Getting Set Up for Tax Reporting and Business Operations
While you may conduct your personal financial life in a shoebox, sticking receipts and notes there for later reference by your tax preparer or you at tax time, you can't do the same for your business. The tax law requires businesses to keep books and records and to make them available to the IRS upon request.
Of course, good records aren't just for tax purposes. You can't run your business properly unless you can refer to records to know whether you're profitable, how your cash flow stands, and what you expect your upcoming expenses to be.
Once you set up a recordkeeping system that works for you, there are more steps to take to get started. To formalize your tax reporting, you need to make two decisions when you start your business activities: a tax year and an accounting method. For most self-employed individuals, the decisions are simple, but you still need to understand what these decisions mean to you.
Beyond your tax concerns, make sure you have the right licenses and permits to operate your business. Maintaining these licenses and permits is part of your ability to legally conduct business.
In order to keep good records of your business activities, it's vital to separate ...