Cash business question (financial statements)?

Question

I'm starting a business which will deal primarily in cash. My inventory will be bought with cash, and I will be selling via cash. I am wondering if I should start an LLC? If there is any software that can help me as a small-business owner as far as keeping track of inventory costs, and payments. I also need to know about the tax aspect... what would be the best thing to do there?

Answer 1

You can setup a Single Member LLC, which for tax purposes will be a disregarded entity. Meaning that you dont need to file a separate tax return for the business, but you can just put the business income/expenses on a Schedule C form on your 1040 Individual tax return.

The IRS does not care whether your business is cash based or credit-card based, so long as you report all income, then you are fine.

I would suggest starting with a simple software like QuickBooks. It is easy to setup and use. At the end of the year, quarter, month, you then take the quickbooks file to your CPA and they will prepare a financial statement. You will need this in order to qualify for loans (if you dont already have a main job). As well, at the end of the year, the quickbooks file will be used by your CPA to prepare your taxes.

A caveat, once you start a business, you need to conult with a CPA in order to get the LLC filed and obtain your tax I.D., state sales tax license, etc. Do not start a business without consulting a CPA. Boilerplate LLC operating agreements that you can purchase at any store are not the way to go, as they may not cover all aspects of your particular business (i.e. they need to be tailored).

Answer 2

Sounds like a lot of cash passing hands and the IRS doesn't like this. If you are in business the transactions need to be recorded and all sales and purchaces need to be recorded so taxes can be paid when required. If you are in business and don't know how to keep books and records you aren't really ready. you need to talk to a CPA and get advice on how to keep up with the book keeping and how to deal with taxes. It may be you need to pay quarterly so you won't be so overwhelmed at the end of the year. An LLC would require three people I believe and you'd need to incorporate and you will need insurances and licences and tax number so on and so on. a business is not easy. You can ask the small business administration for advice and they are usually willing to help. some areas have incubators where small businesses share things like copiers, computers and maybe even software for book keeping. Ask at the local community college about this. You can look up SMBA on the web and call them, they can help with business plans, loans and all of that. Good luck. Please do a lot more homework before putting any money into this venture, it needs more thought and a concrete plan.