Small Biz Books & Deductions… Accounting Fundamentals for Creatives
Guest: Amanda Lo – CPA
Host: Kristy Oustalet
Show Notes for this episode are linked up at http://kristyoustalet.com/24
My guest this week is Amando Lo, and she does what we creatives generally find cringe-worthy… she’s a CPA that manages the books and records for small businesses.
Lucky for you and me, that there are people like her in the world in that handle these sort of things for us right-brainers.
She realizes that small business owners simply don’t have the time to properly keep track of their books, and takes care of it so that you can focus on what you do best + grow your business.
Oh, man. I feel lighter already…
Amanda walks us through some accounting fundamentals and deductions that likely affect your business.
It’s essential to have a business checking account that is separate from your personal. Not only does it make things easier to keep track of, but co-mingling your accounts can cause the IRS to discredit write-offs.
If you work out of a Home Office, keep these factors in mind:
– to deduct home office expenses, it has to be a defined separate space that is used exclusively for your business (no bed, no tv…)
-it also has to be the primary place for your business
-Square footage gives you the percentage of bills you can deduct or:
-You can claim a flat rate of $5/sq ft (up to 300 ft) can be a flat deduction without having to show any records
-Taking pictures of the space is generally a good idea to have proof if you should ever need it.
Good-to-know: Hobby Loss Deduction
If you are in your first few years of business and your expenses are higher than profits, you may qualify for a Hobby Loss deduction. Which means that you can write off the loss as a deduction as long as you can prove that it’s a legitimate business (and not just a hobby).
One of the most common first steps to growth is hiring contract labor (as opposed to hiring an employee). Remember: If you pay a contract employee more that $600 in a calendar year, then you have to give them a 1099 which can be easily done online.
If you’re about to launch your business and have no idea where to start, do this:
– Create a Business Checking account at your bank
– EIN — Employee identification number that you can get through an online form
-Create an LLC- you can diy through the Secretary of State website (typically $100). This protects your personal property from liability that your business may have.
Need a great accountant? Here are a few ways to sniff out one that’s a good fit:
-Having a CPA license generally qualifies someone as being very capable and reputable
-Ask for recommendations- from biz friends or post in start-up community Facebook groups
-Look for accountants that enjoy working with micro-businesses and startups
-Set up meetings with a few accountants to find someone that you jive with