My wife and I run our own business. Occasionally, people that are looking to do the same thing will ask me for advice on what to do. My advice is always the same: talk to an accountant.
See, it's not that accountants are particularly necessary for doing things like keeping track of who paid you when: we actually do that ourselves. It's that the tax laws in this country are so unbelievably complex that you can't be an expert in your field and tax law too. Why are the tax laws so important? Because of two things:
- Picking the type of company to form (S Corporation, LLC, sole proprietorship, etc.) has a major impact on your tax liability.
- Figuring out what is an allowable deductible expense is hard. Getting it right can mean thousands of dollars a year in your pocket and/or your retirement accounts. Getting it wrong can mean an audit at best and jail time at worst.
An accountant is going to cost you, but they should always save you way, way more than you pay them. Talk to a few of them, though. One thing we found out was that there are as many approaches as there are accountants. This is something that is brought home to me by the fact that every time I ask our accountant what I think is a straightforward money question, he says, “Welllll...it depends,” and then goes on to explain what it depends on.
Which is exactly the same answer I give to software architecture questions. :)