Now that you have a separate bank account for your health & wellness business, you can begin keeping the books. It will make taxes easier and help you understand your profits and losses.

Getting Started

Here are some of the things you’ll need to do for basic bookkeeping.

  1. Document your transactions. You can be old school and use paper,  or you can use a computer spreadsheet or a software program like Quicken or QuickBooks to document and categorize your transactions. You’ll have expense categories like advertising, supplies, rent, utilities, insurance, and professional services (attorney, accountant), among other things. Software programs sync up with your business bank account and allow you to categorize each transaction on your computer or an app on your smartphone. There is an annual or monthly fee for these programs.
  2. Set aside time regularly to do your bookkeeping. At least on a monthly basis you’ll want to review your transactions and reconcile your bank account.
  3. Keep your receipts for business expenses. You need to keep a record of all your expenses for tax purposes. You can keep a file or use a bookkeeping app to photograph them.
  4. Pay yourself like you’re an employee. If you worked for someone else you’d receive a regular paycheck, whether it’s weekly, bi-weekly, or monthly. Set up a payment schedule for yourself in the same way. For instance, you might take a draw from your business twice a month as your paycheck.
  5. Don’t forget taxes! Because you’re self-employed, you’ll be paying both the employer’s and employee’s share of taxes. Keep in mind that while you may be able to take a tax deduction for your expenses, you still have to pay tax on your income. Small businesses are expected to pay estimated taxes on a quarterly basis, but if you’re unable to do that, you’ll owe a lump sum come Tax Day. Your accountant can advise you for your specific situation.
  6. Figure out your profits and losses each month. Total up how much you earned each month, then subtract your expenses. If you made money, that’s your profit. It can take small businesses up to three years to be profitable, so you may be seeing more red (losses) on your profit and loss statement until then.

Save Time

If you categorize your expenses as you go, whether through a software program or on paper, it will save you time later. When it’s tax time all of your income and expenses will already be categorized, making the whole process much simpler. Time management is a large part of owning your own business, so be sure to set aside time regularly to keep up your bookkeeping.

Questions?

If you have any questions about your health & wellness business, don’t hesitate to contact me at regenoldlaw@gmail.com.

One of the important steps when starting your health & wellness business is opening a bank account for your business. Many business owners overlook this step and simply use their personal account. Here’s why you need a separate account and how to set one up.

Why You Need a Separate Business Account

What’s it matter if you keep all your money in your personal account? Who needs the hassle of one more thing to manage? Here’s why you need a separate account:

  1. A separate business account makes bookkeeping and tax time much simpler if you’re looking at one account for business transactions and not wading through your personal expenses.
  2. A separate business account protects your personal assets if you have a legal entity, like an LLC, partnership, or corporation. Part of the benefit of a legal entity is to prevent creditors or litigants from going after your personal assets. But if you’re intermingling business and personal funds, you may lose the protection of that corporate shield.
  3. A separate business account helps you understand your profits and losses. You’ll be able to see how much money you have coming in and going out of your business account, so you can adjust your schedule and spending as needed.

Opening a Business Account

You’re ready to open an account.  What do you need to do? Here are steps to opening your business account:

  1. Obtain your free Employer Identification Number (EIN) from the IRS. You can learn what that is here.
  2. Choose a bank or credit union. You might think this is one more fee coming out of your business profits, but a number of banks offer free checking accounts for small businesses. Just do a quick internet search to find one and save yourself a few bucks in fees.
  3. Bring your EIN, identification, and your legal-entity formation paperwork (certificate of organization/articles of incorporation and the operating/partner/shareholder agreement) to the bank with you. Due to new regulations passed last month, if you have a legal entity, the bank will also ask you to fill out paperwork identifying who has control of it and who is a beneficial owner. This is to prevent money laundering by sham entities.
  4. Keep copies of your bank statements, whether digital or paper, and reconcile your account to see if it matches up with what your income and expenses were.

Positives Outweigh the Negatives

While it may take more effort to have a separate account, it actually gives you a clearer financial picture and saves time when you’re preparing to file your taxes each year. It also demonstrates strong business sense in case one day you want to bring on a partner, expand, or sell your business.

Questions?

Email me at regenoldlaw@gmail.com  or share your thoughts in the comments below.