By Kelly Benton on | No Comments
April 15th will be here before you know it. If the thought of taxes and business finances sends you into a cold sweat, then now’s the perfect time to finally take control of your finances and do yourself a favor by hiring an accountant.
I recently had the opportunity to sit down with Karen Schultz of CKS Accounting Services, LLP. Being that I’m a photographer (and not particularly money-savvy), I had a bazillion questions to ask her.
To start off, I wanted to know some of the basics and what to look for when hiring a professional accountant:
When you hire a professional accountant, you will have the benefit of their knowledge and experience. They can guide you through the process of registering your business and help you choose the entity structure that works best for you, whether that's a Sole Proprietorship, a C-Corp, an S-Corp, or Partnership. There are pros and cons to each of these that your accountant should be able to explain to you.
An accountant can also figure out your potential tax liability throughout the year. You can certainly try to do this on your own, but it may end up costing you more in the long run, especially if you are disorganized.
A Sole Proprietorship does not file a separate business tax return; this is the simplest business structure and if you choose to go this route, you will just file a Schedule-C along with your personal tax return. All profits and losses for your business will be included on that schedule and filed with your personal tax return.
If you structure your business as an S-Corp, you will file an 1120-S tax return. A Schedule-K will be prepared along with this return, reporting your income or loss. The figures on the Schedule-K will then be used to report your profit or loss on your personal tax return.
A C-Corp is generally not advised for a small business, as there can be double taxation issues.
A big advantage of setting up a Corporation (S-Corp or C-Corp) is the protection of your personal assets, whereas with a Sole Proprietorship, all of your personal assets can be at risk if your business is sued.
A Certified Public Accountant (CPA) has a degree from a 4-year university and has passed a very comprehensive test to become certified to do any kind of public accounting and tax work. CPA's can prepare both financial statements and tax returns. They are typically used by larger businesses and probably will be the most expensive option.
Accountants have more experience than bookkeepers, but don't have the certification that CPA's do. They should be able to handle ANY sort of accounting situation that may arise, whereas a bookkeeper may just handle certain things, like accounts payable, accounts receivable, or bank reconciliations.
An accountant should be able to prepare a financial statement for internal use only and MAY be qualified to prepare a tax return.
Accountants will generally cost less than a CPA but more than a bookkeeper, which will be the least expensive option.
Most accounting firms will prepare an engagement letter, which is a contract that will spell out YOUR responsibilities, THEIR responsibilities, the work to be done, and what it will cost.
Here are some important questions to ask your prospective accountant before you hire them:
CPA firms will usually charge for all phone calls. Most smaller accounting firms and individual accountants won't charge for phone calls or emails, unless it gets out of control (like 10 emails per day), or have to do research to answer your questions.
This is a very difficult question, because it you will find the costs to be all over the board. A big factor will depend on what part of the country you live in. For instance, to hire a Quickbooks trainer, you can expect to pay anywhere from $50 to $100 or more per hour. That’s a wide range.
The same goes for bookkeeping or payroll processing. A typical bookkeeper will charge in the range of $35 to $65 per hour. On the other hand, if you hire a CPA to do the same work, the fees will probably be AT LEAST at $100 per hour and most likely even higher.
If you are a small, one-person business with only a couple of bank accounts, who doesn’t need payroll, billing, or invoicing, you could expect your accountant to bill you for about 3 hours of work per month. But obviously, the more transactions you have, the longer it will take them to do their work.
Its up to you, but keeping track of your own income and expenses versus handing your accountant a box of receipts at the end of the year will make a huge difference in overall cost to you.
Basically, the more organized you are, the more money you will save, because it won't take your accountant or bookkeeper as long to sort through everything.
Sometimes accountants will charge a fixed fee instead of hourly rate. So if you are not very diligent about tracking your finances, you might want to work out some sort of fixed fee rate if possible.
Absolutely. The information you give your accountant will be entered into accounting software and categorized accordingly. At the end of the year, they can give you a print out of all income and expenses for the year and should be able to help you plan a budget for the next year.
After discussing the ins and outs of hiring an accountant for my photography business with Karen at CKS Accounting, I had some additional questions about taxes, write-offs, expenses, and receipts. Read the 2nd part of my interview HERE.
Do you have any questions or comments about Hiring an Accountant for Your Photography Business? Just leave us a comment below - we would LOVE to hear from you! And PLEASE SHARE this post using the social sharing buttons (we really appreciate it)!
Kelly Benton lives with her husband and two adorable dachshunds in Northeast Indiana, where she works from home as a Wedding Photographer. When she’s not photographing over people’s love, she’s a wannabe-rockstar triathlete with a penchant for funny movies and craft beer.