| Sole proprietor, Inc, LLC, - What does it all | | | | From the IRS point of view, the more |
| Mean?Your childcare is a business. While you may | | | | records and documents to substantiate your |
| not need to formally create a legal business, there | | | | position, the better. Invoices, receipts, |
| are options to consider if you have an especially | | | | credit card statements, bank statements and |
| large operation, or employ more than one person. | | | | cancelled checks are all good evidence |
| From a legal standpoint, different types of entities | | | | of the expenditures incurred. There are also |
| provide limited liability. This is something you would | | | | several accounting programs - |
| want to discuss with a lawyer.Different entities | | | | available at any store that sells computer |
| also provide different tax advantages and | | | | software - that are inexpensive and work |
| disadvantages. The type | | | | great for tracking expenses and providing useful |
| of entity really depends on the business and how | | | | financial reports. Several online |
| many people own the business. | | | | companies sell software specifically for childcare |
| An accountant should be able to advise you on | | | | providers.Be sure to set up a filing system for |
| the best entity for your situation.What can you | | | | your records. It doesn't need to be fancy, as |
| deduct on your taxes? Any why would you want | | | | long as it makes sense to you and you can find |
| to?Each time you claim something as a deduction | | | | your records once tax time comes |
| on your taxes, you reduce the | | | | around.Keep work and personal expenses |
| amount of money the government can tax. By | | | | separateHaving a separate checking and savings |
| reducing that amount, you can | | | | account for your business will make |
| reduce how much tax you pay, letting you keep | | | | keeping track of your finances a lot easier. Sure, |
| more of your money.A simple rule of thumb to | | | | you have to balance another |
| remember is any ordinary and necessary business | | | | checkbook, but you'll know that all money in and |
| | | | out of those accounts has to do |
| expense is deductible. Keep in close contact with | | | | with your business. Also, consider getting |
| your accountant, and find one if | | | | separate credit cards for the business. |
| you don't have one. Regular meetings or | | | | When you use all of these accounts exclusively |
| discussions with the accountant will help | | | | for business, it is much easier to put |
| in working through what is considered ordinary | | | | all your records together, rather than trying to |
| and necessary for your business. Be | | | | separate out what is business and |
| sure to keep in mind all the expenses you incur | | | | what is personal.Ahh, taxes. Where do we |
| when doing business - ie., don't | | | | start?Tax laws are so specific to your state and |
| forget things such as mileage on your vehicle. | | | | city, that it's hard to give even general |
| Trips to the bank to deposit your | | | | guidelines. You may want to check with a local |
| weekly daycare income, for instance, is an | | | | accountant or state and local tax |
| ordinary and necessary business expense | | | | authority to find out if there are any special |
| that is deductible.Who has time to file receipts | | | | rules, permits or taxes that you may |
| after a day with the kids?Even though resting | | | | need to run your business. Paying your taxes |
| from your busy day sounds better than filing you | | | | quarterly might be an option, so you |
| receipts for | | | | can spread the payment out over the year |
| groceries that week, stay on top of your | | | | instead of paying it all at one time.Melissa Newby |
| paperwork and make sure you keep records | | | | is the cofounder of Sawicki is a CPA practicing |
| of all the money you spend on your business. | | | | Tax and Financial Planning in Madison WI. |