Book Keeping is Important
When you first form an LLC, your initial energy will be focused on translating your product into a profitable venture. In that setting, some view bookkeeping systems, including those for business tax reporting and filing, as a low priority. While that is understandable, it is not wise, since inadequate bookkeeping could be costly - in terms of time and money - in the long run.
A formal process is an absolute requirement, particularly if there are multiple clients and purchases, and perhaps even subcontractors. At that point, most people seek help, or take a course or two in bookkeeping. It gets rather complicated, and becomes time consuming. If you find the idea of keeping your own books boring or intimidating, then you can contract our bookkeeping services. A good service can keep you from making mistakes that invite audit by the IRS. We offer book keeping to client regardless of whether we are their New Mexico registered agent.
Book Keeping Services
Decide on A Structure
Before you start your business, view our page on incorporating in New Mexico. There we discuss the relative merits between sole proprietorships, partnerships, limited liability companies and corporations. Your structure affects your bookkeeping, including how you account for your business's revenue and costs and your tax reporting. It also can affect your personal exposure with regard to business liabilities. If in doubt, consult your business attorney and/or accountant about which structure is best for your business and why. Note, every New Mexico company must have a registered agent in New Mexico.
Keep Your Books Current
Accurate and up-to-date bookkeeping is necessary for a successful business. Therefore, even if you dread this chore, set aside time to update your business's books on a regular basis, perhaps once a week... or have us do it! Our book keeping service pairs well with our virtual office service. You can have your paperwork sent to us for sorting and handling. Get Professional Help
Whatever business structure you choose, but especially if your business will be a corporation, talk to your accountant. Find out what records you need to keep and what expenses are deductible. You may use our book keeping services, or maintain your own books with a service like Quicken. Also discuss whether you should pay yourself a salary and, if so, how much it should be. This can be an important issue, because, in some cases, the IRS may construe not taking a salary as a way to avoid payroll taxes. In addition, your accountant can explain what tax payments and filings your business will have to make. Plus, using a professional service such as ours helps keep your LLC anonymous.
Open a Bank Account
Having a separate bank account for your business is essential because mingling business and personal income and expenses can cause confusion and result in costly errors in your tax reporting. Learn about opening a bank account here and EIN guide under the "Resources" tab of the navigation menu.
Take Taxes Seriously
Many new businesses run into financial trouble because they don't understand their tax filing responsibilities. This is understandable; not only may your business have to pay federal income, payroll and unemployment taxes, but it will probably be responsible for state and local income taxes and state unemployment taxes, may have to pay state sales taxes and disability taxes, and perhaps will be liable for other state or local business taxes and fees.
Whether you or your accountant handle the tax filings for your business, we can provide the necessary book keeping services on a timely basis. As daunting as the tax system may seem, once you understand your tax liabilities and are registered online, the actual filing process often is relatively quick and easy.
Keeping The Books
After forming your LLC, you
will want to start keeping track of your expenses. If you like, you
may pair our
virtual office and
book keeping services to
reduce the demands on your organization.
Expense Records: Careful and accurate records of your expenses are very important for tax purposes. If you use the manual method, something other than a shoe box is required. If you use an accounting program or a bookkeeping service, most of the solutions to the problems are presented in such a fashion that you are encouraged to keep good records. Expense records are divided into the following classes:
NOTE: In general, it is better not to pay in cash for any business activity. A check or a credit card receipt provides not only proof of the expenditure, but also provides space for notes about the nature of the expense.
1. Mileage Expenses - Keep a mileage log on the vehicle that you use for business transportation, and keep it up to date. (The Internal Revenue Service rules are very specific on this point, and, if you are audited, it is one of the points that will almost certainly be checked.) This log may be on your computer, but it must be kept up to date. If you use a vehicle that is owned or leased by your business, and you do not use it for private purposes, all of the expenses for that vehicle are deductible as business expenses. If you use your personal vehicle for business transportation, you may reimburse your personal account for mileage from your business account at the current mileage rate allowed by tax rules. (Check with your tax accountant for the current rate.) If you do this, you need not pay withholding and self-employment tax on the full amount, and you may use that amount as a business tax deduction.
2. Other Travel Expenses - Keep records of all business travel by means other than your private or business vehicle, noting who, when, where, and for what purpose. If you travel to distant places for business calls, and the travel costs are substantial, the accuracy of these records is even more important.
3. Telephone Expenses - If your office is located away from your home, and you have a business telephone in that office, the service charges and toll expenses for that telephone are legitimate business expenses and are entirely deductible. If your office is in your home, and you pay for your telephone from your personal account, part of that telephone expense is also a legitimate business expense and is deductible. When you receive your telephone bill each month, compare it with your telephone log, mark each business call, and record the business total. You may then reimburse your personal account for those business calls and not pay withholding and self-employment tax on that amount. Keep the telephone bills as parts of your tax records. If you keep the bills as parts of your personal tax records, make certain that these are available in the event of a business tax audit, and vice versa.
4. Miscellaneous Business Expenses - Keep receipts on everything that you purchase for the business. This includes all work supplies as well as capital equipment. Do not overlook any items, no matter how small. Even paper clips and rubber bands add to your expense load, so take all of the tax advantage that you can.
5. Entertainment Expenses - Keep very good records on business meals and other entertainment expenses, noting who, when, where, and for what purpose. Ask for a receipt at each expenditure and note the circumstances on or with the receipt. Entertainment expenses are almost always scrutinized by the Internal Revenue Service. Talk with your tax accountant so that you understand the rules before incurring significant entertainment expenses.
Preparing proper financial reports is imperative. They act as your financial dashboard and should drive decision making. Even with this importance, though, proper book keeping can often fall to the way side. For this reason we provide a number of resource articles, along with book keeping and accounting services.
New Mexico Corporate Services
Thank you for taking the time to read our page. Beyond resource articles, we offer numerous services designed to make opening and running your company easy. We can help you form an LLC in New Mexico, act as your registered agent in New Mexico and help set up a virtual office.