How do I account for personal expenses when first setting up a home-based business
My company is a single owner LLC, making jewelry. I am just setting up all
of my purchases & income in QuickBooks, and now l wanna make sure that
everything is in the correct account. l have paid for everything so far
out of my own resources. -- Inventory -- is this debit ''start up
expenses'' / credit ''inventory asset''?? --other purchases such as
tools and supplies - how would they be accounted? -- other things such as office supplies and furniture? What would be debited / credited? -- what gets counted as 'owner is expense'?? 'Owner is equity?' Thanks so much - I am trying to get things right for filing taxes!! As a single owner LLC, it is a ''disregarded entity'' by the IRS. l would file a 1040, and use a Schedule C. l just wanna make sure I've got everything accounted for in terms of: owner equity, owner expense, etc. Thanks!
I am not 100% correct, but i think the other respondent is
incorrect.
An S-Corp flows to the personal 1040. I don't think an LLC does. Have
you already established this? Have you considered an S-Corp? Taxwise it
may be benefical.
The way I handle it in quickbooks: Deposit money as ''owner investment use that money to buy everything associated with the company: -- start up expense - would be a one time start up requirement -- inventory = inventory asset -- tools = fixed asset (this would be high dollar amount tools that you would depreciate) -- general tools = like wire cutters or something would be general expenses -- office supplies = general expenses -- furniture = general expenses or fixed assets Using the help text in quickbooks will help. Also, check out the business resources at CountMeIn.org = a free group geared towards women business owners
Since ur business is single owner & it is an LLC all the
expenses & profits go to you. Any money you spend for the business is an
expense to the business. Any profits you make get reported on ur 1040 as
income.
Generally speaking these types of businesses should use cash accounting.
It is much easier & requires much less depreciation work for things like inventory or cost of goods. Money spent to operate or get the business started is an expense. Money left over after all the expenses is profit. Simple as that. You can capitalize a lot of money each year, I think it is $100,000. That means all ur expenses up to $100,000 can be taken against profits in the first year. If ur business doesn't make profit in the first or second year, you can carry the ''loss'' forward & take it against future profits. QuickBooks can help you with this. Just keep things simple & work on the business itself, not the accounting. Good Luck
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