Do I Need an Accountant for My Small Business?

What you need to know when assessing your accounting needs.

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June 9, 2022
Amir Deen
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As a small business owner, you’ve likely asked yourself the question, “Do I need to consult with an accountant or can I handle it myself?” In order to help you answer this question, it’s important to understand what accountants bring to the table and where your specific business could benefit from their expertise.

How Can an Accountant Benefit My Small Business?

Whether you’re in the planning stages or you are already profitable and looking to expand your small business, having an accountant can be crucial to helping you know what you need to do to stay on track. Determining if you should consult with an accountant depends on a number of variables, namely how your business is structured and what resources you have at your disposal.

Let’s dive into the specifics of how an accountant could bring value to your business type and examine how that value stacks up against the cost.

 

Setting Yourself Up for Small Business Success

graphic/w each of the following words with question marks sprinkled in:Sole proprietorship? Limited Liability Company (LLC)? Partnership? Corporation? S Corporation?

Though starting a new business is exciting — and it can be tempting to want to rush into things — informed planning can greatly increase your chances of achieving success. Having an accountant at this early stage of your business journey can help you avoid costly pitfalls and make informed decisions about your business’s structure.

When it comes to structuring your business, you’ll have to decide what type of entity makes sense for your business and register it accordingly. Types of business entities include:

  • Sole proprietorship
  • Limited Liability Company (LLC)
  • Partnership
  • Corporation
  • S Corporation

Typically, small business owners will register their business as either a sole proprietorship or a Limited Liability Company (LLC). Each type of entity has its own benefits and restrictions, and variables like funding sources, employee headcount, and anticipated profitability need to be considered. The entity type you choose will affect how your business files taxes, a significant detail to consider when you are in the planning stages and beyond.

When deciding which business entity type is the best match for your vision, an accountant may be an invaluable resource to consult. Because accountants have a thorough knowledge of the pros and cons associated with each entity type and how each type may impact your taxes, it often makes sense for most prospective entrepreneurs to consult with one in the early planning stages.

Staying on Track as Your Business Grows

While it’s clear that accountants can be instrumental in the early planning stages for a small business owner, they can also be helpful once your business starts growing and expanding.

Doing your personal taxes can be a convoluted, confusing, and labor-intensive process that leaves you feeling overwhelmed. Business taxes can be even more tricky and being able to properly file them can be the difference between keeping your enterprise afloat and closing up shop. Having an accountant to walk you through the process of doing your business taxes can not only make the whole process less daunting, it can help ensure that you’re never caught off guard with unforeseen business tax expenses.

Remember, the more your business grows, the greater your business tax burden will become. Accountants can provide you with clarity about business taxes and how they will change as your business grows.

Maintaining Compliance

In addition to taxes, another bureaucratic obstacle that plagues small business owners is complying to business regulations and licensing requirements. There are compliance requirements for businesses at the federal, state, and local levels, not to mention across industries, and fulfilling the requirements for each is not always clear cut.

An accountant has the expertise to walk you through the process and ensure that your business is compliant at every level. Accountants can provide you with the guidance and insight to make sure that your business has all of the licenses and other necessary requirements to operate.

Small business owner shown doing some sort of crafts/hobby small business

Does My Sole Proprietorship Need an Accountant?

If you’re one of the many business owners that have opted to register your business as a sole proprietorship, then you may not need to hire an accountant.

As a sole proprietor, your business’s taxes will be filed with your personal taxes. Though your business taxes may turn out to be a little trickier than your personal taxes, you’re likely capable of keeping track of it all, especially if you are adept at keeping track of expenses and documenting transactions.

Another factor that can make business taxes more difficult is the amount of revenue that your business generates. The less it is, the easier your business taxes will be.

If you find that your sole proprietorship business is small enough that you can easily keep track of sales and revenue, then you may not need professional assistance from an accountant. However, it’s important to keep in mind that an accountant brings with them insight and expertise that accounting software may not be able to provide.

Does My LLC Need an Accountant?

Letters LLC in blocks

If your small business is an LLC, it may be in your best interests to enlist the help of an accountant. Taxes can become difficult to navigate once you start generating more revenue, and having an accountant to give you some guidance can be a tremendous help.

Accountants — specifically those who specialize in small business — can help you both create a tax strategy and determine what kind of tax classification is right for you.

Hiring an accountant can be especially helpful if you intend to switch tax classifications, which can be a complicated process.

Do I Need To Hire a Full-Time Accountant?

Though you may be convinced that having an accountant would be beneficial to your small business, you may be wondering if you’ll need to hire one full-time.

The answer to this question will vary depending on your specific business and your personal needs. However, most smaller businesses will not need to hire a staff accountant as many accountants are available on a part-time basis at an hourly rate.

If your business is outgrowing the small business label and it’s becoming difficult to keep track of the day to day, then it’s probably a good idea for you to consider hiring a full time accountant. On the other hand, if you feel like you just need a little extra guidance in a few areas — such as taxes — then you may be able to get by with the help of a part-time or per diem accountant.

What About Accounting Software?

Now that you’re aware of some of the ways an accountant can help your business, you may be wondering if accounting software may be a middle ground between figuring it all out on your own, and paying an accountant to handle it all.

Accounting software like Quickbooks, Freshbooks, and Xero can be an effective alternative to hiring an accountant for some small businesses — typically sole proprietorships with lower revenue and easier-to-manage taxes. These software tools are an attractive option for small business owners because of their lower cost and relative ease of use.

It is important to remember that software, while significantly less expensive than retaining an accountant, will run you approximately $15 a month for a basic or limited plan. Therefore, you will want to check pricing to see if your business needs fall into a modest package or if it brings you to the highest end.

Remember, you will not only need to be able to learn how to use the software, but you will need to connect it to your existing systems to benefit from any automatic features you are hoping to use. If you are accustomed to setting up management systems this may be an attractive option for your small enterprise.
 

Simple chart comparing different accounting software

Can I Be My Own Accountant?

Most small business owners have asked themselves the question, “Can I be my own accountant?” The short answer is that it may be possible, but it’s not necessarily the best choice.

As a small business owner, you could benefit from having an accountant help you with aspects of your business such as planning, strategy, and managing taxes. Though accounting software will make it possible for you to perform some of the technical functions of an accountant, it won’t be able to provide you with advice and guidance specific to your business's unique profile.

Lastly, but certainly not least, it’s important to consider how much of your time will be spent taking care of the accounting yourself, whether assisted by software or not. Most small business owners wear many hats and their most valuable asset is their time. For nearly every business owner, time is money and it’s important to compare an accountant’s rate against the time investment you will inevitably make when taking it on yourself.

Take Your Small Business to the Next Level

Accounting is one of many elements that can affect your small business’s success. In addition to careful accounting, your small business needs to market its services and communicate effectively to your audience.

If you find that you’re having trouble getting the word out about your small business, EZ Texting’s text and SMS marketing services can help you market your products and services and take your small business to the next level.

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