QuickBooks is a great small business accounting solution. Not surprisingly, then, QuickBooks should work well for most small business accounting situations. QuickBooks, for example, will easily produce a profit-and-loss statement for your tax return and for your management reporting. And QuickBooks will produce good balance sheets–and those will be necessary if your limited liability company operates as a partnership or a corporation and grows above a certain size.
Note: If a partnership or a limited liability company treated as a partnership has revenue that exceeds $250,000 or total assets that exceed $650,000, the partnership or LLC treated as a partnership must include a balance sheet as part of its tax return. If a corporation or limited liability company treated as a corporation has revenue or assets that exceed $250,000, the corporation tax return needs to include a balance sheet as part of its tax return.
I have written an entire book that’s really about using QuickBooks for your small business accounting system. That book, as you can probably see from the margins of this website’s pages, is QuickBooks for Dummies. Because I talk lots in the QuickBooks for Dummies book about how to do small business accounting, I’m not going to repeat that information here.
I do, however, have two terribly important bits of QuickBooks set up advice for you if you plan to use QuickBooks for a limited liability company.
Setup your QuickBooks data file for the right tax return
Here’s my first bit of QuickBooks setup advice.
What you want to do, when you set QuickBooks up, is tell QuickBooks not that you’re setting up for a limited liability company. Rather, tell QuickBooks that you setting up the books for sole proprietorship (if that’s how you’ll treat the LLC for tax accounting purposes), or as a partnership (if that’s how you’ll treat the LLC for tax purposes), or as an S corporation or C corporation ( if that’s how you’ll treat the LLC for tax purposes).
QuickBooks doesn’t need to know whether legally the entity you are using as a platform for your business is a limited liability company or a corporation or a sole proprietorship. Rather, what QuickBooks needs to know is how the accounting is supposed to work. And the big thing that drives the accounting is which kind of tax return the accounting system needs to supply information for.
Don’t forget about paying LLC members payroll when appropriate
Let me also share again one other quick reminder that I have already made several places at this website: If you have made or plan to make an election to have your limited liability company treated as a C corporation or as a S corporation, you will need to pay your LLC member-employees reasonable wages.
The IRS, when its grants your LLC its C Corporation or S corporation status, does remind you that you need to pay wages to LLC members working as employees. You get your reminder in the acceptance letter you receive if you successfully make the S or C corporation election.
But as the weeks roll by, forgetting to do some payroll for the LLC members is pretty easy. Unfortunately, forgetting to pay wages to C corporation shareholder-employees can be disastrous (and trigger the C corporation double-tax), and forgetting to pay S corporation employees wages can cause you to lose the very tax savings you’re supposed to get from operating as an S corporation.
Note: QuickBooks supplies a payroll function that you can use to do payroll for a handful of employees, including shareholders-employees of an LLC treated as a C corporation or as an S corporation. You may want to use this future. But if you don’t use the built-in QuickBooks payroll feature, consider signing up with an outside payroll service bureau like ADP or Paychex. You can pay them $80 or $100 a month to do your LLC’s payroll.