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Your AccountKick Playbook
At Kick, we support your business as you grow. We created this Playbook as a general guide to help navigate the most common administrative basics that our users encounter when setting up and operating a business.
How to Use
The Playbook is divided into sections: Sole proprietor, LLC, and S Corp, followed by a section that applies to all entity types. That way, you can navigate to the information that applies to you, and jump over the entity-specific guidance that doesn’t.
Remember that this is a general guide. We know that each business is unique, and therefore, it’s advisable to work with a qualified CPA or professional who can give you advice tailored to your specific situation.
Sole Proprietor
As a sole proprietor, you are the sole owner and operator of your business. You don’t have a registered LLC or corporation, and you’re making money independently. You may have a side hustle, do creative work, or work freelance as an independent contractor.As a sole proprietor, all profits and liabilities flow to the owner. This is the easiest type of business to set up.
Entity Type: Sole prop vs. LLC
What it is: Determine whether you should operate as a sole proprietorship or form an LLC.
Importance: Some primary considerations are:
- Liability protection. Forming an LLC provides limited liability protection, which means that your personal assets are generally protected if your business faces legal or financial troubles.
- Simplicity and cost. LLCs are fairly straightforward to register but typically involve more paperwork and cost than a sole proprietorship.
- Business credibility. LLCs can give your business more credibility in the eyes of customers, suppliers, and potential partners.
- Personal privacy. LLCs often require public registration and may have more public information available, such as business address and the names of members.
How to do it: If you decide to form an LLC, it will be registered with your state. Check your Secretary of State’s website for guidance, or you can use a third party provider such as Corpnet or Northwest.
If you want to form an LLC, check out the LLC Section for more step-by-step guidance.
Business Name Registration
What it is: Registering the name of your business with the appropriate government authority to legally operate under that name. You may need to register a “Doing Business As” (DBA) or fictitious name, particularly if you’re not using your legal name.
Importance: Ensures you have the right to use your business name, and protects it from being used by others in your jurisdiction.
How to do it: Check with your local government office or business registration agency websites for specific requirements and process.
Employer Identification Number (EIN)
What it is: An EIN is a 9-digit number assigned by IRS to identify businesses for tax purposes.
Importance: It helps identify your business separately from your personal entity. Some banks require an EIN to open a business bank account, and you’ll need one if you plan to hire employees.
How to do it: Apply for an EIN online through the IRS website.
Business Bank Account
What it is: Open a separate bank account exclusively for business transactions.
Importance: Keeps your personal and business finances separate. This will make bookkeeping and tax filing much easier and more accurate, and allow you to more easily track your business finances.
How to do it: Most banks offer business account options. But even if you use a separate personal account for your business activities, that’s a big step in the right direction.
Limited Liability Company Playbook
As a Limited Liability Company, your company is registered with your state. This entity type offers limited liability protection to its owner(s) and pass-through taxation.
LLC Formation: Overview
What it is: Forming your LLC by filing the required paperwork with your state’s Secretary of State or business registration agency.
Importance: Establishes your business as a legal entity that provides limited liability protection.
How to do it: Check your Secretary of State’s website for specific requirements, or you can use a third party provider such as Corpnet or Northwest.
LLC Formation: What State Should I Choose?
What it is: Decide which state to register your LLC in.
Importance: The state you choose can impact the formation process, cost, compliance requirements, and other legal considerations.
How to do it: The best state to register your LLC is usually the one you live in. If you form an LLC outside of your home state, you’ll also be required to register your LLC as a Foreign LLC in your home state- that could mean 2 LLC filings, more fees, and more admin work.
One notable exception to this rule-of-thumb is real estate LLCs. It’s typically best to form a real estate LLC in the state where your property is located.
We recommend asking your CPA or attorney what’s best for you, given that your specific situation may differ from the general guidance above.
LLC Formation: Choose your Business Name
What it is: Select a registered name for your company.
Importance: Choose a unique and distinguishable name for your LLC that complies with your state’s naming rules.
How to do it: Check that your chosen name is available through your state’s business name database or Secretary of State website. It must be distinguishable from other registered businesses. It typically must include “Limited Liability Company,” “LLC,” and may not include “Corporation” or “Incorporated.”
LLC Formation: Select a Registered Agent
What it is: Appointing a reliable point of contact to receive legal and official documents on behalf of your LLC.
Importance: This is often a legal requirement and ensures you receive documents in a timely manner.
How to do it: You can choose an individual (including yourself) or use a registered agent service. They must have a physical address (not a PO Box) in your state of formation and be available during regular business hours.
Choosing yourself is usually the easiest and least expensive option, but if you don’t have an address in the state where your LLC is formed, or you’d prefer to hire a commercial registered agent (such as Northwest), your registered agent will receive and forward any documents to you.
LLC Formation: Articles of Organization
What it is: Preparing and filing Articles of Organization with your state to officially create your LLC. (Sometimes also called Certificate of Organization or Certificate of Formation.)
Importance: This is a fundamental document required by the state to recognize your LLC as a legal entity.
How to do it: Check your Secretary of State’s website for the specific form required, complete the required information (business name, address, registered agent, etc.) and submit (usually electronically) with the required filing fee.
LLC Formation: Operating Agreement
What it is: This outlines the ownership, management structure, and operating procedures of your LLC.
Importance: This isn’t usually required by law. However, it’s good practice to establish rules and responsibilities among members and define how the business operates, which can prevent misunderstandings in the future.
How to do it: There are lots of online templates that may be a good place to start- you can then modify to suit your specific business and state rules. This is an internal document, so you don’t need to mail it to the State or the IRS, just keep it in your business files.
Topics to consider include: who the members are and their ownership percentages, how the LLC is managed, how profits and losses are distributed, how taxes are paid, and what can trigger a dissolution of the company.
LLC Formation: Apply for an Employer Identification Number (EIN)
What it is: An EIN is a 9-digit number assigned by IRS to identify businesses for tax purposes. It’s like a social security number for your business.
Importance: It helps identify your business separately from your personal entity. Some banks require an EIN to open a business bank account, and you’ll need one if you plan to hire employees.
How to do it: In most states, you should wait for your LLC registration approval before applying for an EIN (though two state exceptions are LA and WV). Apply for an EIN online through the IRS website. Your EIN confirmation letter is usually downloadable at the end of the online application process, and you’ll receive a copy in the mail weeks later.
Foreign (out of state) LLC Filing
What it is: Registering your LLC to operate in a state other than the one where it was initially formed. (This doesn’t refer to LLCs formed outside the US.)
Importance: If your LLC was formed in one state but doing business in another state, you may need to file as a foreign LLC in the second state to legally operate there.
How to do it: We most commonly see this situation arise when people form an LLC outside of their home state in an attempt to save money on filing fees. The process of registering a foreign LLC includes designating a registered agent, paying filing fees, and getting a Certificate of Good Standing from the original state. You don’t need a new EIN.
You can usually file online from the Secretary of State’s website.
Business Bank Account
What it is: Opening a separate bank account exclusively for your business.
Importance: Keeps your personal and business finances separate. This will make bookkeeping and tax filing much easier and more accurate, and allow you to more easily track your business finances. Having a separate bank account also reinforces your LLC’s limited liability protection, as your business entity is separate from your personal finances.
How to do it: To open an LLC business bank account, you’ll need your EIN confirmation, LLC registration approval, and photo ID. Check with your bank, since some require additional paperwork.
Once your business bank account is open, all business transactions (income and expenses) should happen there, and NOT in a personal account.
S Corporation Playbook
S Corp status is a tax election, rather than a separate type of entity, most commonly used by LLCs that have grown their net income. As an S Corp, you elect special tax treatment for your company in order to minimize self-employment taxes.
S Corps: Overview
What it is: Choosing to be treated as an S Corporation for federal tax purposes.
Importance: This is a tax status choice that an LLC (or other qualifying entities) can make to alter the way that it’s taxed.
The default tax status for a Single-Member LLC is a “disregarded entity,” and a Multi-Member LLC is treated as a partnership. In both cases, the LLC’s income and losses are reported on the owners’ personal tax returns.
By making an S Corporation election, the LLC can avoid paying self-employment taxes (social security and medicare) on a portion of income.
As an S Corp, an owner pays themselves a reasonable salary, subject to self-employment tax, and takes the remaining profits as distributions, which are not subject to self-employment tax. This can be beneficial for profitable LLC owners who want to minimize their self-employment tax liability.
How to do it: Complete and file Form 2553, “Election by a Small Business Corporation,” with the IRS. You can file by fax.
S Corps: Is it right for me?
What it is: Deciding whether S Corporation taxation is available and beneficial.
Importance: S Corporation status has eligibility requirements, and may not provide financial advantages for every business.
How to do it: An LLC seeking S Corp status may not have more than 100 members, and any members must be US citizens or residents. Review the full list of requirements to make sure you qualify.
Generally, LLCs with net income of at least $80,000 will save money by electing S Corp taxation. That’s because some savings on self-employment taxes will be offset by higher operational and administrative costs of an S Corp. The larger your net income, the larger your tax savings can be from making the S Corp election.
However, there are other details to consider, including your personal tax situation, your state, and your long-term business goals. We recommend asking your CPA if an S Corporation election is right for you.
S Corps: Reasonable Salary
What it is: Establishing an appropriate salary for an S Corp owner.
Importance: S Corp owners who perform services for the company must receive “reasonable compensation” for their work. This is a crucial part of complying with IRS regulations regarding S Corp tax status.
Essentially, when an LLC is taxed as an S Corp, the owner becomes an employee of the company and must receive a salary. Wages paid to the owner are subject to self-employment taxes, and the remaining profits are distributions, not subject to self-employment taxes. That’s the primary benefit of the S Corp tax election (pass-through taxation).
The IRS wants to ensure that owners are not setting their salary too low in order to avoid self-employment taxes.
How to do it: Unfortunately there’s no specific formula, and the IRS will consider a blend of facts and circumstances to evaluate reasonableness of compensation. Research salaries for similar positions in your industry, location, company size, and profitability to determine a benchmark market rate. Document how you decided on your salary, and it’s good practice to be consistent in your decision-making. Your salary should be based on objective criteria, market conditions, and consistent with industry standards.
S Corps: Payroll
What it is: Setting up payroll for the S Corp owner (and any employees).
Importance: S Corps must withhold payroll taxes from employees’ wages. Failure to timely pay payroll taxes can result in penalties and interest.
How to do it: There are several payroll providers that perform this function, but we like to use Gusto. Gusto walks you through setting up your payment details, collecting required information, and compliance with applicable laws.
S Corps: Accountable Plan
What it is: Tracking personal and business mixed-use expenses and getting reimbursed for the business portion.
Importance: Business owners usually have some expenses that are for both business and personal use. Common examples are rent (if you have a home office), or automobile use (if you use your car for work). An accountable plan makes sure that you’re tracking these expenses and having your business pay for the business part of the expense.
How to do it:
ALL ENTITIES
Bookkeeping
What it is: Maintaining accurate and organized records of your business income, expenses, and transactions.
Importance: Bookkeeping is critical for monitoring your business’s financial health, preparing for taxes, and making informed business decisions. It also helps properly identify and support your write-offs so you save money on taxes.
How to do it: Kick makes bookkeeping easy by putting your books on autopilot using AI-powered software. We’ll categorize your transactions, maximize your write-offs, and give you clarity about your finances.
Paying Taxes
What it is: Fulfilling your tax obligations, which may occur quarterly and/or at year-end.
Importance: You must comply with tax laws to avoid penalties or legal issues.
How to do it: You can file your own taxes using the IRS electronic payment system or third-party software, though most Kick users end up hiring a CPA as their business grows.
Tax Deadlines
What it is: Staying apprised of when tax payments are due. Taxes may be due at several intervals throughout the year (not just one year end filing!).
Importance: Paying taxes in a correct and timely manner helps avoid IRS penalties.
How to do it: Subscribe to Kick’s Federal Tax Calendar to stay on top of your tax deadlines as they approach. Keep in mind that your state may have additional filings required- be sure to check your state’s tax authority website.
2023 Federal Tax Deadlines:
Upcoming estimated quarterly tax payments:
- April 17, 2023: deadlines for 2023 Q1 period
- June 15, 2023: deadline for 2023 Q2 period
- Sept 15, 2023: deadline for 2023 Q3 period
- Jan 15, 2024: deadline for 2023 Q4 period
Extended 2022 tax filing deadlines (if you extended your tax filing):
- Sept 15, 2023: S corporations, Partnerships, and MMLLCs
- Oct 16, 2023: Sole proprietors, Single-member LLCs
2023 Taxes Due:
- March 15, 2024: S Corporations, Partnerships, and MMLLCs
- April 15, 2024: Sole proprietors, Single-member LLCs
Other deadlines:
- Jan 31, 2023: deadline to send 1099 and W-2 forms
Quarterly Estimated Taxes
What it is: If you’re self-employed, you may be required to pay estimated taxes on a quarterly basis. If your payroll taxes are not withheld automatically, or if withholdings are not enough to cover your tax liability, you may need to make estimated payments.
Sole props, partnerships, LLCs, and S Corps who expect to owe >$1000 in taxes are generally required to make quarterly tax payments.
Importance: Paying taxes in a correct and timely manner helps avoid IRS penalties. Plus, paying taxes in regular installments can help manage cash flow better than having a large lump payment at the end of the year.
How to do it: To calculate your quarterly payment, you can divide last year’s tax amount by 4.
If your 2022 adjusted gross income was >$150k (joint filers) or >$75k (single filers), multiply last year's tax amount by 1.1, then divide by 4 to get your quarterly amount.
You can pay online via the IRS website, or your CPA can file on your behalf.
Note: If you’re an S Corp running payroll, you can also fulfill part or all of this requirement through payroll withholding. Ask your CPA if this makes sense for your situation.
Invoicing
What it is: Sending payment requests to your clients for goods or services rendered.
Importance: Ensures you get paid promptly, and supports record-keeping for you and your clients.
How to do it: Lots of solutions exist, but we like Stripe for its clarity, intuitive infrastructure, and widespread adoption.
Paying Contractors or Employees
What it is: Handling payment for anyone working for your business.
Importance: Ensure you’re compensating those who are doing work for your business, and comply with applicable documentation rules.
How to do it: We like Gusto for setting up both payroll for employees, and facilitating contractor payments. Gusto walks you through setting up your payment details, collecting required information, and compliance with applicable laws.
Issuing 1099s and W-2s
What it is: Providing necessary tax forms to independent contractors (1099s) and employees (W-2s) for reporting income to the IRS.
Importance: Comply with tax regulations and helps individuals file their own tax returns accurately.
How to do it: If you use Gusto for paying contractors and employees, they handle this step for you based on the information they already have on file.
Mileage Tracking
What it is: Keeping a record of business-related travel for tax deduction purposes.
Importance: Allows you to claim mileage deductions to reduce your taxable income.
How to do it: We like MileIQ for mileage tracking. It’s a simple app that automatically tracks and logs your drives, which you can flag for business reporting.
Retirement accounts
What it is: Setting up retirement accounts for yourself, such as a Simplified Employee Pension (SEP) IRA or a Solo 401(k).
Importance: Helps you save for retirement while potentially offering tax benefits.
How to do it: We’d recommend consulting a financial advisor to talk through which option is best for your situation.
Insurance and Compliance
What it is: Acquiring the necessary insurance coverage and complying with any regulations relevant to your industry.
Importance: Protects you and your business from potential risks and legal issues.
How to do it: Make sure you research if specific regulations, license or permit requirements exist for your specific industry or jurisdiction.
Health Insurance
What it is: Acquiring health insurance coverage as a business owner.
Importance: Access to affordable healthcare is important for your health and well-being. But- if you’re a solo business owner, you’re unlikely to qualify for a group plan from an insurance broker.
How to do it: If you’re unable to get a group insurance plan, you should check out the HealthCare.gov marketplace.
If you’re an S Corp, your company can pay your healthcare premiums as a non-taxable employee benefit! You can set this up to run through your payroll software (e.g. Gusto).
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- Kick Playbook
- How to Use
- Sole Proprietor
- Entity Type: Sole prop vs. LLC
- Business Name Registration
- Employer Identification Number (EIN)
- Business Bank Account
- Limited Liability Company Playbook
- LLC Formation: Overview
- LLC Formation: What State Should I Choose?
- LLC Formation: Choose your Business Name
- LLC Formation: Select a Registered Agent
- LLC Formation: Articles of Organization
- LLC Formation: Operating Agreement
- LLC Formation: Apply for an Employer Identification Number (EIN)
- Foreign (out of state) LLC Filing
- Business Bank Account
- S Corporation Playbook
- S Corps: Overview
- S Corps: Is it right for me?
- S Corps: Reasonable Salary
- S Corps: Payroll
- S Corps: Accountable Plan
- ALL ENTITIES
- Bookkeeping
- Paying Taxes
- Tax Deadlines
- Quarterly Estimated Taxes
- Invoicing
- Paying Contractors or Employees
- Issuing 1099s and W-2s
- Mileage Tracking
- Retirement accounts
- Insurance and Compliance
- Health Insurance