C Corporation taxes are taxes based on profits and losses and taxed directly to the company. The formula for determining the tax is complicated and should be calculated by a CPA to avoid IRS penalties.

S corporation taxes are taxes based on profits and losses but are reflected on the owners’ personal income tax returns. Once again, this is a difficult tax to calculate and using a CPA is recommended.

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Opening a business bank account is an important step for creating a business identity as the IRS requires you to keep your personal funds and business funds completely separate. When considering a bank, look at the following:

• Online facilities, such as online banking, a Merchant ID, credit card processing facilities etc.

• A bank that is close to your place of business. If you also have a brick-and-mortar office or retail outlet, this will make depositing and withdrawing funds easier.

Software can make your bookkeeping and accounting easier and more efficient. It will allow you to type in an expense and the software system will put it where it belongs.
Accounting software has different modules dealing with different areas of accounting.

• Accounts Receivable—where the company enters money received
• Accounts Payable—where the company enters its bills and pays money it owes
• General Ledger—the company’s “books”
• Billing—where the company produces invoices to clients/customers

Obviously, your ultimate goal is to run a profitable business. You can only do this if you stay in touch with where your money is coming from, and, just as importantly, where your money is going.

Accounting is the system that keeps track of data, provides reports, payroll, and tax status. Recording your transactions and information is called bookkeeping, and it must be done regularly. Having record keeping systems in place before you launch your business is highly advised.

Many of your business expenses can be deducted from your taxes. Therefore, good record keeping can save you money and will definitely