What to ask your accountant at your first meeting

1. What form of business entity you should establish
2. When do you need to start paying estimated taxes
3. Which accounting software do they recommend
4. What chart of accounts should you set up in the software
5. Can they help you get organized to handle employer taxes

1. What form of business entity you should establish

Ask your CPA what form of business he or she thinks you should start with -- sole proprietorship, Limited Liability Company (LLC) or corporation (C Corporation or S Corporation). (Notice that we left out partnerships because they seldom work, so select a different form.) The accountant will ask you a few questions, then recommend which form seems right for your startup. If the form you choose requires legal help, ask your CPA to recommend an attorney.

Note: CPAs and attorneys in the same general location typically know which of their fellow professionals have experience in what types of work for which industries. If they refer another professional to you, their referral is based on insight you could never glean from phone books or resumes.

Want more info on your business entity options?

Idea Cafe / Legal Set-Up

Also, on the IRS site, their Frequently Asked Questions (FAQs) provides plain language, short answers to questions from people like you on business entity forms and many other helpful topics. Start with the Small Business/Self-Employed part of the FAQ index and explore by category or keyword. Or, better yet, just browse through -- you’re sure to learn tips you never thought to ask about.

IRS FAQ

2. When do you need to start paying estimated taxes

Now that you will be a business owner, you will be paying your own taxes as you go instead of having an employer withhold them from your salary checks.

Depending on your situation, you may not have to pay estimated taxes to begin with -- or you may. Your accountant will tell you which situation you fall in. And if you’ll need to pay, she’ll give you or direct you to the proper forms to use.

Here’s more information on your responsibility for paying quarterly estimated taxes:

Idea Cafe / About Estimated Taxes

3. Which accounting software do they recommend

Before you officially launch, get your ducks in a row and your accounting software ready. When you meet with your accountant, discuss which accounting software program you’re considering for your small business and see what she thinks. You don’t want to go with something that’s going to cause problems down the line. And you certainly don’t want to change programs -- converting from one program to another is a hassle you want to avoid if you possibly can.

So you won’t have to pay your accountant to tell you something you could have learned about for free, read up here to understand why you need accounting software, how you use it and what your options are.

Tax Center / Recordkeeping / About choosing accounting software

4. What chart of accounts should you set up in the software

Every accounting setup has a chart of accounts -- it’s the accounting framework which organizes all of a company’s transactions. To normal people “chart of accounts” is a misnomer. It is not a chart, like you think of a pie chart or bar graph. And everything in it is not what you think of as an “account” -- although some of these accounts do happen to be bank accounts.

The chart of accounts is a just a list of the different buckets which can accept numbers that represent amounts of money. Some buckets are grouped together in various hierarchies. Your software program will offer several suggested charts of accounts, including some for certain industries or business situations.

It’s important to get your tax pro’s okay before you charge in and start using a software program’s chart of accounts as-is, because he probably won’t agree 100% with what the program suggests. In fact, many of accountants prefer to provide you with their own list to set up from scratch instead of using the software’s default.

5. Can they help you get organized to handle employer taxes

If you doubt you’ll ever hire any employees, you can skip this question. But if you anticipate having employees in the future, ask it now.

Having employees requires whole new levels of paperwork and money management. So you need to know in advance whether your accountant's office will help you when the need comes or if they recommend other resources.

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