LLC Bookkeeping 101: Everything You Need to Know 

A few years ago, we bought a treadmill, thinking we’d run every morning. We started on a high note but then lost consistency, and now we just see the treadmill but don’t use it.   

But why are we telling you this? And no, this isn’t clickbait.   

The reason for telling you this is just like our treadmill; starting an LLC is easy. You form your company, get the name, and may even launch a website.  

However, you can’t keep track of money properly, and eventually, things can get messy.   

So, in this guide, we’re breaking down LLC bookkeeping, an essential part of running a business that you can’t ignore.   

So, make sure to read through the end!   

How to Set Up LLC Bookkeeping?   

Let’s clarify one thing: good bookkeeping protects the very thing that makes your LLC special: limited liability. On the other hand, if your books are a mess, you could end up blurring the lines between you and your business, and that’s where things can go sideways.  

Courts might ignore your LLC protections if they see signs like:  

• Moving money around without any paper trail  

• Forgetting to file key documents with the state or IRS  

So, here’s how to set up LLC bookkeeping:   

1. Start by Opening Separate Business Accounts  

This is step one for a reason. You need to open a business bank account, checking account, and even a separate credit card in your LLC’s name, using its tax ID. Then, draw a hard line that you are not gonna mix personal and business expenses.   

Sure, you can pay yourself from the LLC or invest personal funds into it. That’s fine. But what you shouldn’t do is use your business card to grab birthday gifts or cover your Netflix bill from your personal account and call it a business expense.  

Keeping things separate also makes your life easier when tax season comes. All your expenses will be in one place, and that makes tracking deductions and filing less stressful.   

If you haven’t set up a business account yet, Ramp offers corporate cards that come with built-in expense management, bill pay, and invoice tracking features. It’s a great way to keep your bookkeeping system organized and cloud-based from the start. Plus, there’s a bonus waiting for you if you sign up using our link.     

2. Choose an Accounting Method That Works for You  

When it comes to tracking your LLC’s finances, you have two options: cash-basis or accrual-basis accounting.  

The cash basis is simple. You only count money when it actually changes hands. You record income when you get paid and expenses when you pay them. This method is a favorite among small businesses because it’s easy to follow and gives a clear picture of cash flow.  

An accrual basis, on the other hand, records income and expenses when they happen, not necessarily when transactions happen. If you send an invoice in April but don’t get paid until June, you’d still count that income in April under the accrual method.  

Are you not sure which one to go with? Cash basis can be a suitable choice if you are just starting out and want simplicity. But if you’re planning to scale or want a more accurate picture of your finances, accrual might serve you better.  

3. Set Up a General Ledger   

A general ledger is your command center. It records every business transaction and filters it into five key categories: assets, liabilities, revenue, expenses, and equity.  

The general ledger helps you track your money’s movement, prepare for tax season, apply for funding, and stay prepared for an audit.  

Back in the day, the general ledger was a big book accountants would write in. But now, we have bookkeeping software like QuickBooks or Xero that can automate the whole process. 

Why LLC Bookkeeping Matters?    

If you are thinking, “Oh Tangent, I can record numbers; I’m good at Math,” we are afraid you are wrong. Bookkeeping is about giving your business a solid financial foundation so you can enjoy long-term sustainability.   

Here’s how proper LLC bookkeeping (especially with professional help) can make a difference.  

1. It Frees You Up   

When an accountant takes care of your books, you’re not stuck in this quagmire of sorting receipts or figuring out how to categorize random expenses. Instead, you can focus on what moves the needle, such as landing new clients, refining your services, or scaling your business.   

For instance, let’s say you run a small renovation business. Instead of going through receipts for last month’s expenses, you can focus on quoting new projects, as you know your bookkeeper is doing the job for you.   

2. You Stay on Top of Tax Laws  

Tax rules change all the time. A good accountant doesn’t just keep up with those changes. They help you adjust your strategy to stay compliant and save money.   

You also get help finding deductions you might otherwise miss, such as mileage, software subscriptions, or home office expenses.   

3. Lower Your Tax Bill   

One of the biggest advantages of working with a pro is they know how to legally reduce your tax burden. They’ll structure your financials in a way that keeps you in good standing with the IRS while taking advantage of every legal deduction.  

For example, if your LLC pays you a salary and you also take owner draws, your accountant can help make sure those payments are optimized for tax efficiency.  

4. Better Access to Loans and Investment  

If you need funding or investments, banks and investors will look into clean business financials. If your books are a mess, your chances can drop.   

But if an accountant has been keeping everything neat, you’ll have solid financial statements, making it much easier to secure a loan or attract investors.  

5. Peace of Mind During Audits  

Nobody likes to think about business audits. But if it ever happens, having organized, up-to-date books can make a huge difference. Your accountant can walk you through the process, help you gather the right documents, and communicate with tax authorities on your behalf.  

In short, it’s like having a guide through a confusing maze—someone who knows the rules and can help you avoid expensive mistakes.  

How to Choose the Right Bookkeeping Service for Your LLC?  

In the last section, you got to know about how a pro can help you, but how can you hire the right service? It’s about finding a partner who understands your business and can help you make smarter financial decisions.   

Here’s what to look for and what to ask when choosing the right bookkeeping service for your company.  

Find Someone Who Understands Small Businesses  

You want more than a general accountant—you want someone who knows how small businesses work, especially if you’re wearing multiple hats as the owner.   

Bookkeeping for LLCs comes with its quirks, and working with someone already familiar with your setup can save you time, money, and a whole lot of stress.  

Look for a pro who knows how to handle things like owner’s draws, estimated tax payments, and industry-specific deductions.   

A generalist might get the basics right, but a specialist will help you uncover savings and avoid mistakes you didn’t even know you were making.  

Ask the Right Questions  

When you’re talking to a potential bookkeeper or accountant, don’t just ask about their hourly rate. Ask about their experience with businesses like yours, how they handle tax planning, and what services are included.  

Here are a few starter questions:  

• Have you worked with other LLCs in my industry?  

• What’s included in your monthly or quarterly service package?  

• Can you help with budgeting, forecasting, or tax strategy?  

• How do you communicate with clients, and how often?  

See Who Fits  

Someone may have 20 years of experience, but if they’ve never worked with a business like yours, that might not be helpful. Find someone who’s seen the financial situations you’re dealing with, such as managing subcontractors, tracking inventory, or handling variable cash flow.  

For example, if you run a landscaping business and your bookkeeping firm only works with tech startups, they might miss seasonal cash flow issues or overlook specific write-offs.   

Credentials Count, But Results Count More  

Yes, you should absolutely check for certifications such as CPA, bookkeeping certifications, or QuickBooks ProAdvisor status, for example. These show the level of professionalism and education an accounting firm brings.   

But don’t stop there. Look at client testimonials and reviews, or even ask for references. You want to know how they’ve helped businesses like yours, how responsive they are, and whether they deliver when things get hectic (like during tax season).  

Look for Tech-Savvy Bookkeepers  

Your bookkeeper should be comfortable with digital tools. You need to ask if they use QuickBooks Online, Xero, or a more advanced dashboard. Also, ask how they track your numbers and if they provide comprehensive reports.  

Bonus points if they help you set up automated invoicing, receipt scanning, or payroll syncing.  

Think Long-Term   

The best bookkeeping service isn’t just someone who “does your books.” They’re someone who helps you make confident decisions year-round.   

From helping you set up a realistic budget to guiding you on cash flow or expansion, a good accountant becomes part of your team.   

Final Thoughts  

We hope we have simplified LLC bookkeeping for you. Running an LLC means taking your finances seriously from day one. Setting up clean bookkeeping, staying on top of tax rules, or managing cash flow sets the stage for smoother operations down the road.   

A solid financial foundation now can save you a lot of stress (and money) later.   

Speaking of saving stress and money, for over a decade, we’ve been helping LLC owners like you ditch the overwhelmed and take control of your finances.  We become your full accounting department, so you don’t have to hire people individually.       

Let’s get your accounting system working for you!           

P.S. If you are reading this, it means you can have access to our free consultation for your business. Avail this for free today before we change our mind.   

FAQs  

What are the 5 stages of bookkeeping?  

They are: recording transactions, posting to accounts, preparing trial balances, making adjustments, and creating financial statements.  

Is QuickBooks good for LLCs?  

Yes, QuickBooks is a solid choice for LLCs, as it’s easy to use, and you can use several automation features.   

What is the cheapest way to do accounting for a small business?  

You can use free or low-cost software like Wave or DIY with spreadsheets.