Why your LLC needs up-to-date books, even if it is small, and how to keep them in QuickBooks

Short answer

Up-to-date books let you prove every deduction, know whether the business really makes money, make the right estimated payments and file on time. The IRS requires you to keep records that support your income and expenses, generally for at least three years after you file. A simple monthly routine in QuickBooks Online takes less time than rebuilding the whole year in March.

What good books give you

• Deductions you can defend. In an audit, an expense without a record is an expense you can lose.
• Real numbers to decide. Pricing, hiring, or whether an S-Corp election makes sense.
• Correct estimated payments, instead of a large bill and penalties in April.
• Loans and credit. Banks ask for a profit and loss statement and a balance sheet.
• Protection for your LLC. Keeping business and personal money apart helps preserve limited liability.

How long to keep records

According to the IRS, the general rule is three years from the date you file. It is six years if you left out income of more than 25% of what you reported, and seven years for a bad debt or worthless securities deduction. Employment tax records are kept at least four years. If a return was never filed, there is no limit. Records about property are kept until the period ends for the year you sell it.

A monthly routine in QuickBooks Online

1. Connect the business bank and card accounts so transactions come in automatically.
2. Categorize every transaction once a week or once a month: income, each type of expense, owner draws or contributions.
3. Attach the receipt from your phone to each expense when you pay it.
4. Send invoices from QuickBooks and record payments, so you know who owes you.
5. Reconcile each account against the statement at the end of the month. It is the step that catches errors and duplicates.
6. Review the profit and loss and set aside money for taxes.

Common mistakes

• Using a personal card for business, or the business account for personal expenses.
• Recording owner draws as expenses, which understates profit and causes problems in an audit.
• Not reconciling, so the books do not match the bank.
• Not collecting a W-9 from contractors, then not being able to issue the 1099s; see our 1099 guide.

Behind on your books?

A cleanup is normal. We start from the bank statements, rebuild the months that are missing, reconcile everything and leave you with a routine that takes minutes a week.

How we can help

We are a certified QuickBooks Online ProAdvisor: we set up your company, clean up past months and keep your books monthly, ready for tax time. See our bookkeeping service.