When you become self-employed or start a business there is a lot to consider and do. I have created a simple accounting checklist for becomi
When you become self-employed or start a business there is a lot to consider and do. To help with the accounting side of becoming self-employed, I have created a simple checklist.
If you have any questions about any of the steps below, please feel free to contact me info@bpfs-online.com
Self-Employed / Sole Trader Accounting Checklist
1. Register as self-employed
My first suggestion is that you register as self-employed with your countries tax authority.
You will need to do this for a couple of reasons... First, it is usually a legal requirement. Second, registering as self-employed will enable you file your income tax return each tax year.
Depending on your tax authority, upon registration, you will receive helpful reminders and be able to gain advice from their helplines.
Note: If you are based in the UK, you will need to register for self assessment with HMRC. You can register online at www.hmrc.gov.uk. Your annual income tax return is referred to as self-assessment tax return.
2. Open and activate online tax accounts
Once you have registered with your tax authority, you may receive a tax reference or identification number (depending on your country of residence).
Most tax authorities allow you to file your annual income tax return online, so open an online account.
Note: If you are based in the UK, you should receive a Unique Tax Reference (UTR). Once you have this, you can open an online self assessment account at www.hmrc.gov.uk.
3. Open a business bank account
You will need to keep your business and personal financial transactions separate. One of the best ways to do this is to open a business bank account.
Most retail banks offer business bank accounts. Book an appointment and get your new business bank account opened.
Need an accountant? Get in contact with me - info@bpfs-online.com. I offer accounting services for new and small businesses.
4. Find an accountant
An accountant will help calculate your tax liability, detail the profitability of your business, and file your tax return.
Having an accountant is also great for advice and support. I suggest you find an accountant as early as possible - many accounting mistakes can avoided by having an accountant early.
Note: If you are based in the UK, then I (the Bookkeeping Master) can be your accountant! Just drop me an email for a quote or visit my accounting practice website at SM Accounting.
5. Keep all receipts and purchase invoices
In order to calculate the true profitability and growth of a business, all details of income and expenditure need to be kept. It is also usually a legal requirement to keep these documents. Depending on the size of your business, a simple folder containing the documents can suffice.
If you have any questions or concerns, contact your accountant!
6. Create a bookkeeping system or outsource to a bookkeeper
Even though your accountant will calculate the tax and profitability of the business, you will need to keep record of the day-to-day financial transactions of the business. Keeping record of these day-to-day transactions is referred to as keeping the "books" or accounts (the accountant will use the books or accounts in order to calculate profit and provide tax services).
Note: Most business owners prefer to outsource their bookkeeping so that they can focus on growing the business and ensure that the accounts are kept correctly. You can outsource your bookkeeping to me (the Bookkeeping Master).
If you are operating through a limited company, I suggest you read my Limited Company Accounting Checklist post.