Part 10: Taxes, Banking, Bookkeeping, and Insurance

This part of the guide has 57 pages so far. Each page answers one question, shows what to do, and ends with an audit check you can use on your own business.

10.1 Set Up Federal Tax Administration

• 10.1.1 Employer Identification Number: An EIN is a free federal tax ID from the IRS. Learn who needs one, how to apply online in minutes, what you need first, and how to avoid sites that charge a fee.
• 10.1.2 Federal Tax Classification: Your legal structure and any tax election decide how the IRS taxes your business. Learn the default rules for LLCs, what Forms 8832 and 2553 do, and when to ask a CPA.
• 10.1.3 Tax Year: Most small businesses use the calendar year for taxes. Learn the difference between calendar and fiscal years, how you adopt one, and why changing later needs IRS approval.
• 10.1.4 Accounting Method: Cash accounting counts money when it moves. Accrual counts it when it’s earned or owed. Learn the IRS rules, who can use each, and why changing later needs approval.
• 10.1.5 Estimated Taxes: Business owners often must pay federal taxes four times a year. Learn who has to pay, the due dates, how to figure the amount, and how to pay the IRS online.
• 10.1.6 Federal Filings: See the main federal returns a small business files for income, payroll, excise, and contractor payments, when each is due, and how to build one filing list.
• 10.1.7 Responsible Party: The IRS responsible party is the real person who controls your business. Learn who qualifies, why a formation service can’t be listed, and how to report changes in 60 days.

10.2 Set Up State and Local Tax Administration

• 10.2.1 State Income Tax: State income and franchise taxes depend on your state and business type. Learn how to find what you owe, register with your state tax agency, and track the due dates.
• 10.2.2 Sales Tax: Sales tax is set by each state, and many tax products but only some services. Learn how to check what’s taxable, get a permit, collect the right rate, and file on time.
• 10.2.3 Use Tax: Use tax is owed when you buy taxable items for your business and no sales tax was charged. Learn when it applies, how to track it, and how to report it to your state.
• 10.2.4 Local Taxes: Cities, counties, and special districts can add their own taxes on top of state taxes. Learn which local taxes to check for, where to look, and how to track them.
• 10.2.5 Resale and Exemption Certificates: Resale and exemption certificates let some sales happen without sales tax. Learn when to give one, when to accept one, what to check, and how to keep them on file.
• 10.2.7 Economic Nexus: Selling to customers in other states can create a duty to collect their sales tax once you pass a set amount. Learn what economic nexus is and how to track it.

10.3 Set Up Employer Tax Administration

• 10.3.1 State Employer Registration: Before you run your first payroll, you usually need state employer accounts for withholding and unemployment tax. Learn what to register, where, and when.
• 10.3.2 State Withholding: If your state taxes wages, you must withhold state income tax from paychecks and send it in on time. Learn how to set up withholding, file, and avoid common errors.
• 10.3.3 State Unemployment: Employers pay state unemployment tax, and paying it on time cuts the federal unemployment tax too. Learn how to register, read your rate notice, and file.
• 10.3.4 Payroll Tax Deposits: Federal payroll taxes are deposited on a monthly or semiweekly schedule, always electronically. Learn which schedule you’re on, the key dates, and how to stay on time.
• 10.3.5 Information Returns: Businesses report what they pay employees on Form W-2 and many contractor payments on Form 1099-NEC. Learn the 2026 limits, due dates, and records to collect.
• 10.3.6 New-Hire Reporting: Employers must report each new or rehired employee to a state new hire registry, usually within about 20 days. Learn what to report, where, and how to stay on time.
• 10.3.7 Workers’ Compensation: Workers’ compensation rules are set by each state. Learn how coverage works, where to get it, what to post and report, and how to check your state’s requirements.

10.4 Open Business Bank Accounts

• 10.4.1 Business Operating Account: A business checking account keeps business money apart from personal money. Learn when to open one, what the bank will ask for, and how deposit insurance works.
• 10.4.2 Tax Reserve Account: A tax reserve account holds money for sales tax, payroll tax, and estimated income tax so it’s there when due. Learn how to set one up and how much to move into it.
• 10.4.3 Payroll and Savings Accounts: A separate payroll account limits who can pull from your main account, and a savings account holds your cash reserve. Learn when each one makes sense and how to set it up.
• 10.4.5 Business Credit Card: A business credit card keeps business spending separate and can help build business credit. Learn the rules to set, who should hold cards, and protections that differ.
• 10.4.6 Account Ownership: Your business, not a bookkeeper, contractor, or employee, should own its bank, card, and payment accounts. Learn how to check ownership, set access, and fix problems.

10.5 Set Up Bookkeeping

• 10.5.1 Chart of Accounts: A chart of accounts is the list of categories your books use. Learn which categories a small business needs, how to keep it simple, and mistakes to avoid.
• 10.5.2 Transaction Recording: Record every business sale and expense promptly, with the date, amount, payee, and purpose. Learn what the IRS expects, a simple weekly routine, and what to avoid.
• 10.5.3 Bank Reconciliation: Reconciling means matching your books to your bank and card statements every month. Learn the steps, what to do with differences, and what proof to keep.
• 10.5.4 Receipt Storage: Store every business receipt where you can find it fast, with a date, vendor, and purpose. Learn what the IRS accepts for digital copies and how long to keep them.
• 10.5.5 Invoice Records: Keep every invoice you send, whether it was paid, unpaid, disputed, or written off. Learn how to track invoice status, number invoices, and how long to keep them.
• 10.5.6 Accounts Receivable: Accounts receivable is the money customers owe you. Learn how to track it with an aging report, follow up on time, and keep unpaid invoices from turning into losses.
• 10.5.7 Accounts Payable: Accounts payable is what your business owes vendors, lenders, and tax agencies. Learn how to list every bill, pay on time, and avoid paying a fake or duplicate bill.
• 10.5.8 Financial Reports: Run four reports each month: profit and loss, balance sheet, cash flow, and job margin. Learn what each one shows, how to read it, and what to do with the numbers.

10.6 Set Spending and Approval Controls

• 10.6.1 Spending and Refund Authority: Write down who can spend business money, who can give refunds or credits, and up to what amount. Learn how to set limits that stop mistakes without slowing work.
• 10.6.3 Vendor Approval and Bank-Change Verification: Check every new vendor before you pay them, and confirm any bank account change by calling a number you already trust. Learn a simple process that stops payment fraud.
• 10.6.5 Owner Reimbursements: When you pay a business cost with personal money, get paid back only with a receipt and a written business purpose. Learn how accountable plans work and what to record.
• 10.6.6 Owner Draws: An owner draw is money you take from the business for personal use. Learn how draws differ from wages and distributions, how to record them, and when to ask a tax pro.
• 10.6.7 Related-Party Transactions: Deals between your business and owners, family, or your other companies need written terms and fair prices. Learn what counts as related-party and what records to keep.
• 10.6.8 Separation of Duties: Split approving, paying, recording, and reconciling between different people when you can. Learn how a small business with few staff can still add checks that catch fraud.

10.7 Set Up Payment Collection

• 10.7.1 Payment Methods: Pick the payment methods your customers want and your business can manage safely. Learn the tradeoffs of cards, bank transfers, checks, apps, and cash, and the tax rules.
• 10.7.2 Deposits: Set clear deposit amounts, timing, and refund rules before work starts. Learn how to record deposits, apply them to the final bill, and check your state’s limits.
• 10.7.3 Progress Payments: Split big jobs into milestones with a payment due at each one. Learn how to set payment triggers, write a schedule, and stay within your state’s payment rules.
• 10.7.4 Final Payment: Define what “done” means before the job starts, so the final payment is clear. Learn how to confirm completion, collect the last payment, and close the job cleanly.
• 10.7.5 Invoices: What every small business invoice should show, how to set due dates and payment instructions, and how to send an accurate final invoice when a job is done.
• 10.7.6 Payment Security: Keep card numbers out of notes, email, texts, and spreadsheets. Learn what card data a small business should never store and how to take payments more safely.
• 10.7.7 Chargebacks: A chargeback is a card dispute that pulls money back from you. Learn what evidence to keep from every job and how to respond on time when a dispute arrives.
• 10.7.8 Refunds: Set who can approve refunds, how fast they go out, and how they’re recorded. Learn the federal rules that can require refunds and how to keep clean records.

10.8 Buy Business Insurance

• 10.8.1 General Liability Insurance: Learn what general liability insurance covers, who usually needs it, how to buy it from a licensed agent, and what proof to keep for clients and landlords.
• 10.8.2 Professional Liability Insurance: Professional liability covers claims that your advice or work caused a client to lose money. Learn who needs it, how it differs from general liability, and how to buy it.
• 10.8.4 Commercial Auto Insurance: Find out when your business needs commercial auto coverage, what hired and non-owned auto means, and what to ask before employees drive for work.
• 10.8.5 Property Insurance: Learn what commercial property insurance covers, why flood is usually left out, how to protect inventory and equipment, and what records to keep for a claim.
• 10.8.6 Cyber Insurance: Cyber insurance can help pay for data breaches, hacked accounts, and recovery. Learn what the FTC says to look for and what to ask before you buy.
• 10.8.7 Tools and Equipment Insurance: Tools in your truck or at a job site may not be covered by a regular property policy. Learn how to insure mobile equipment against theft, loss, and damage.
• 10.8.8 Bonds: Learn the difference between license bonds and contract bonds, when a state or client may require one, how the SBA can help, and why a bond is not insurance for you.
• 10.8.9 Umbrella Coverage: A commercial umbrella policy adds liability limits above your other policies. Learn how it works, who needs it, and what to check before you buy one.
• 10.8.10 Industry-Specific Coverage: Basic policies often leave out product, pollution, liquor, employment, and retirement plan risks. Learn which special coverages to ask about for your industry.

10.9 Build the Financial Calendar

• 10.9.1 Financial Calendar: Build one calendar for tax deadlines, filing schedules, insurance renewals, and weekly and monthly money reviews so nothing slips. Uses IRS Publication 509.