Has Your Holladay Business Outgrown Basic Bookkeeping?

How do you know your business has outgrown basic bookkeeping?

You've outgrown it when the business adds something the books now have to track on their own: a second LLC, an employee, sales tax, sales in another state or a lender who wants statements. One of those is enough. Before that point, doing your own books is usually fine.

Melanie Mathews, who runs Ivory Balance Books, describes the businesses she works with as ones that have "outgrown basic bookkeeping": more than one entity, sales tax, more than one state, employees. Find your situation below, then read the section for it.

Is it still fine to do your own books?

Yes, if you're in the first row. One business, one bank account, no staff and nothing taxable at the register is a simple set of books. Decent software, receipts saved as you go and a regular hour to reconcile the account will cover it.

Paying someone at this stage often isn't worth it. The time to change is when one of the other rows shows up, ideally before a year of transactions has piled up the old way.

What changes when you form a second LLC?

You need a second set of books and a second bank account. The IRS page on LLCs says a one-member LLC is disregarded from its owner for income tax unless it elects otherwise, but it's still a separate entity for employment tax and certain excise taxes. Which election suits you is for your CPA. Separate books are the part you control.

Money one LLC pays for the other goes in both sets of books as an amount owed between them. If two LLCs share an account for a year, untangling it later is slow work.

If the new company trades under a DBA in Holladay, check its state registration before you apply. Holladay's new business license page says the DBA must show the Holladay physical address and Holladay City, and if either is wrong it has to be corrected with the state. The same page asks for proof of registration with the Utah Department of Commerce and a list of corporate officers, if that applies.

What changes when you hire your first employee?

Payroll starts, and so do records you didn't need before. The IRS hiring employees page says you need a Form I-9 for every person you hire, each employee's name and Social Security number for Form W-2, and a Form W-4 on file to know how much income tax to withhold.

Hiring can bring the city into it too, and Holladay's own pages don't quite agree on how. Its home occupation page says that since May 9, 2017 the city no longer requires a license for a home business with no employees or customers coming to the home and no impact on the neighborhood, and its checklist adds more conditions. Holladay's business licensing page still lists that kind of home business among those that need licenses and permits. Both pages treat a home business with employees or visitors as a separate case. Once you hire, ask the city's licensing office what applies. Set payroll up before the first paycheck, and check the license at the same time.

What changes when you start collecting sales tax?

The tax you collect stops being yours the moment you collect it. The Utah State Tax Commission's sales and use tax page calls it a trust fund tax: the seller holds it in trust for Utah until it's paid to the Tax Commission. The same page says returns are due the last day of the month after the filing period.

Holladay asks for the number up front. Its application checklist lists a Federal Identification Number and a Utah State Sales Tax ID number among the information required. In the books, collected tax goes to a liability account every month, so the figure for each return is already there.

What if you sell into other states?

Then where each sale goes starts to matter. Utah's own rule shows why: its page for out-of-state sellers says a remote seller must collect and pay Utah sales tax once its gross revenue from sales into Utah passes a set amount in the previous or current calendar year.

Whether the states you sell into have a rule like that is a question for your CPA. What the books can do is tag every sale by the state it ships to, so the answer is a report rather than a week of digging.

What if a lender asks for financial statements?

Then the books need to be current, not caught up once a year. A profit and loss statement or a balance sheet means little if the bank accounts behind it haven't been reconciled. Closing the books every month means the statements already exist when someone asks.

Does growing in Holladay change your city license?

It can. Holladay's business licensing page says each business location in the city needs its own license, and licenses don't transfer from address to address, city to city or owner to owner. A change of ownership or city means a new application, and a move to a new building needs its building permits approved before the license can be granted.

The same page says the license must be renewed every year, renewal notices go out 4 to 6 weeks before it expires, and renewing is the licensee's job. In the books, a second location's license is its own cost with its own date. Our Holladay page has more on licensing a second Holladay location.

What does handing the books off look like?

It looks like a monthly routine you no longer run yourself. Melanie runs Ivory Balance Books from South Jordan and serves Salt Lake and Davis County, plus clients nationwide. Monthly bookkeeping covers categorization and reconciliation, and monthly financial reports arrive by the 10th. Payroll and sales tax filing are add-ons. If the books are already behind, a historical cleanup brings them current first.