Running the Business · Part 1
EIN, the business bank account, and separating the money: the first bookkeeping setup that survives an audit and a lawsuit
Before the first invoice goes out, the business needs its own tax number, its own bank account, and a way of recording every dollar in and out that you will still understand in April and in a deposition. The EIN is free and takes minutes. The bank account is where the liability protection of a company is actually won or lost, and where a sole owner keeps an audit from turning into a nightmare. The bookkeeping setup is five categories, one rule about receipts, and a Friday habit. This lesson gives the exact order and the records the IRS, the state, and a lawyer will each ask you for.
What the full lesson covers
- Get the EIN from the IRS directly, online, for free. A sole owner without employees can use a Social Security number, but the EIN keeps that number off every W-9, supplier form, and customer file you will ever hand out.
- Open a separate business checking account the same week, in the exact licensed name, and run every business dollar through it. Commingling is how an LLC or corporation loses its liability wall and how a sole owner loses an audit.
- Pay yourself by transfer from the business account to your personal account. Never pay a personal bill from the business account.
- Keep every receipt, invoice, contract, bank statement, and mileage log; the IRS requires records sufficient to prove income and deductions, and the general rule is to keep them at least three years after the return, longer for employment tax and equipment records.
- Reconcile weekly, categorize into a short fixed list, and give the CPA a clean file at year end instead of a shoebox.
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More lessons in Setting Up the Business
- 1The entity is a one-way door: why you decide sole owner, LLC, or corporation before the license issues
- 2Sole owner vs. LLC vs. S corporation for a plumbing contractor: liability, tax, cost, and the small claims limit
- 3EIN, the business bank account, and separating the money: the first bookkeeping setup that survives an audit and a lawsuitYou are here
- 4City business licenses: every city you work in, the Los Angeles business tax, and the seven-day rule
- 5The insurance stack: general liability, commercial auto, the bond, and workers' comp. What each covers, what each does not, and who will demand it
- 6Sales tax for contractors: materials vs. fixtures. The CDTFA rule most plumbers get wrong
- 7Quarterly estimates, self-employment tax, deductions, and mileage: the tax calendar for a first-year contractor
- 8Hiring readiness: what has to exist before the first helper's first day
- 9Template: the business setup checklist, from pass letter to first invoice
- 10Template: the insurance requirements matrix. Who demands what, and the certificate that satisfies each one