Can someone provide a brief description of the accounting differences
(implications) between a sole proprietorship and an LLC or LLP? At this
point I'm most interested in how business accounting is supposed to work
for a sole proprietorship.
Thanks in advance!
The actual bookkeeping requirements are very similar, one small difference
may be in the setup and handling of transactions in owners equity but there
are other major differences in the tax treatment. (federal and state) If
you are contemplating switching from a sole proprietorship to an LLC /LLP
talk to a local tax professional, expecially if you are thinking of getting
a partner involved (LLP)
On Fri, 02 Dec 2005 06:42:32 -0800, in alt.accounting
"Adam W. Montville" wrote in
There should be no accounting difference between an LLC and a sole
proprietorship. There should be no accounting difference between an LLP
and a partnership. The business differences are legal. The LL* limits
liability of the owners, nothing more.
"David Jensen" wrote in message firstname.lastname@example.org...
maybe I was thinking on the state level, there are different forms and some
states and localities charge a big franchise tax for an LLC, also
Quickbooks has different setup procedures for an LLC from a sole
proprietorship but I don't know how relevant that is to the bookkeeping.
I appreciate all the comments. I'm really not following this entirely,
though. It was my understanding that an LLC (I know it differs from
state to state) would require it's own bank account an employer
identification number (if employees were to be hired), and so on.
I suppose this would be true for a sole proprietorship as well. The
thing is that right now I'm paying for everything out of pocket as I
need to, but tracking the expenses. I have no separate bookkeeping for
my personal finances and those related to the business. Should I be
setting up a business account?
On Fri, 02 Dec 2005 09:48:10 -0800, in alt.accounting
"Adam W. Montville" wrote in
Yes, you should be doing that whether you keep the business a sole
proprietorship or go with LLC. The IRS and state agencies like to see
separate books for a business.
"Adam W. Montville" wrote
A sole-proprietor ~should~ have a bank account for the business, separate
from any personal account. So should a single-member LLC (that gets taxed
as a sole-prop), although it may not be "required".
In QB (as well as other software) you can use "Class" to segregate business
revenues and expenses from personal revenues and expenses. It then becomes
easier to run reports for the P&L. Just filter by Class, select the
"Business" (or whatever you call it) class, and away you go. You can also
set selected balance sheet accounts for the "Business" class to track your
depreciable assets, record liabilities, etc.
That or you will need to set up a separate company under QB to break things
down easier (or harder if you try).