If you’re running a business by yourself, you may be considered a solopreneur. And like any other business owner, you need to familiarize yourself with accounting dos and don’ts. Read on to learn more about solopreneurship and tips for handling your books when you’re the one running the show.
What is a solopreneur?
A solopreneur, or solo entrepreneur, runs their own business and is the sole founder. Solopreneurs run their business independently without the help of a co-founder or employees.
Solopreneurs are not the same thing as self-employed individuals. Self-employed individuals can hire employees, while solopreneurs cannot.
Because they handle everything themselves, a solopreneur is responsible for all business duties, including accounting and recordkeeping.
As a solo entrepreneur, you get to call the shots. Not to mention, you’re your own boss and only employee. But because you’re in charge of all of the day-to-day responsibilities, you have to be willing to put in the hours and devote yourself to your startup.
6 Accounting tips for solopreneurs
If you’re thinking about becoming a solopreneur, listen up. There are a number of accounting tasks you have to juggle when you’re running a business on your own. To become a successful solopreneur and keep your books in shipshape, take advantage of these six tips.
1. Keep business and personal expenses separate
Solopreneur or not, mixing business and personal expenses is never a good idea. Combining accounts could quickly cause confusion and a number of issues for your venture.
A separate bank account for business can help you better manage your budget, keep your finances in order, and organize accounting records.
As soon as you start your company, set up a business bank account to separate your business and personal expenses. It may seem like a hassle at first, but you’ll thank yourself later for keeping your expenses split up.
2. Understand your tax obligations
As a solo entrepreneur, one of your bigger responsibilities is handling business taxes. You have to know what they are, what forms to use, when taxes are due, etc. The list goes on and on.
When you start your business, do your research to find out what your tax obligations are. And, be sure you know them like the back of your hand.
Your tax obligations depend on your solopreneurship’s type of business structure. As a solopreneur, you can either be a:
Sole proprietorship Limited liability company (LLC)
Brush up on the pros and cons of both structures to find out which one will best suit your business. Once you determine which one is best, find out your tax requirements, what form(s) you must use, and your business tax return due date.
3. Set aside money for taxes
This next tip goes hand in hand with Tip #2. When it comes to taxes, you don’t want to be left scrambling. To avoid any surprises, set aside money for taxes ahead of time.
Set aside money for your company’s taxes in your business bank account. You might even consider opening a separate account to hold your tax liabilities to ensure you don’t accidentally spend it.
Whatever route you take, make sure you’re setting aside the correct amount of taxes and taking the proper steps to avoid spending it prematurely.
4. Organize and maintain accounting records
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