Setting up as a sole-proprietor

hi, Ann:
You know, this topic appears all over the forums and there is a group of people who try to make one set of books do double duty.  I'm of the opinion that it is always a mistake.  The danger of "commingling" funds is far too great.  My advice -- 2 different sets of books or better yet, keep your personal affairs in Quicken and get a good clean start for your business in QuickBooks.
Dennis

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Hi Ann,

Having QB & Quicken is good. But you can also set up 2 QuickBook "companies" which will be more efficient and easier for you and your tax info will be more at hand.

Set up 1 with your biz name and another as "YourName Personal" or the like, remembering that each "company" must have their own ckg acct.

If, on the other hand, you are a SMALL Sole Proprietor and your personal cks are not abundant then simply set up 1 biz acct with your 1 biz ckg acct and post your personal expenses (Macy's, Safeway) to your Draw acct.

And you can even have sub-categories under Draw (Food, Household, Vacation, Home Remodeling...).

With regards to "SMALL" Sole Proprietor with sub-accounts under Draw, what threshold range qualifies for "SMALL"?

In one month I have 4 or 5 checks and EFT on my personal checking account, 15 to 20 checks and EFT on my business checking account, a handful of other expenses on several credit cards and 12 to 15 cash register receipts for cash transactions. I have 2 checking accounts but not quite so simple for putting in 2 separate QB "company" files because several expenses that need to split. For instance the water bill on one single water meter splits between my Rental upstairs (Sch E), the laundromat in front (Sch C), the carwash next door (another Sch C) and my own dwelling (Draw). Similar to the water is the Propane, Electric, Firewood, and some of the items on some of the cash register receipts.

Is it really better to try and put that in 2 company files?

I'm struggling with these questions as well, and find the whole personal vs business thing completely confusing.

Like some of the others here I'm a sole-proprietor running a small, home-based business, and operating under my own name. So many of my expenses are not clearly business or personal, but are split between the two. For example, home office and automobile expenses. With the auto expenses I don't even know what percentage is business until year-end when I can calculate my total business mileage. So how would I enter my monthly gas receipts?

I've also been using one account to pay for business and personal expenses, but I'm not really sure if I want to set up a separate chequing account for personal use. The only personal cheque I write is for my rent, and a portion of that for my home office, which is a business expense. Same thing for most of my online bill payments for phone, utilities, etc.

Can you see my confusion? I don't know how many bank accounts I really need or how to enter all my split expenses. I'd really like to find a book or online tutorial that clearly spells out the best ways to deal with this home business stuff, but I've yet to find one.

Any advice would be much appreciated.

Thanks,

Andrew

This topic is being paralleled to some degree by Commingling Funds? - Not a Good Idea.  There are a variety of opinions on the subject so I can understand the confusion.  Maybe this other topic will help clarify some of this as well. 
Dennis
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I was just saying instead of having 1 (personal) on Quicken and 1 on QB, have them both on QBooks.

I've never liked Quicken and would never use it, nor would I Ever recommend someone in biz ever use it. There's a reason it used to come Free when you bought a computer...when programs used to come free with it.

And every Sch C (diff co) should have it's own biz and it's own ckg acct. There are several ways to handle splits like billing ea company but I've seen/see so many errors and lack of GAAP with this angle that it is best to just pay each portion with a diff company ck. This will make a Clear audit trail.

eg, PG&E bill arrives for $100.
for company A= $40.00 write a ck fm Co A,
for company B= 60.00 write a ck fm Co B

and simply send them together to the util company...making sure you have written the acct # & date(s) on the Memo of the Bill you have created, which in turn will print on your cks so the util clerks will have the correct info.

Don't forget to create Separate Vendors for each account #.

That goes for Tele, too. Often people post every tele bill to one(1) AT&T vendor. But each phone # s/b a diff Vendor. eg AT&T 555-1401, AT&T 555-1234

You are a perfect example to just KISS (Keep It Super Simple) and to just use your Draw acct for personal expenses.

You should at least guesstimate a % to apply to your auto expenses so you can keep an eye on your Inc Stmt & Net Income. You can always adjust this Dec 31 (or thereafter).

Look at prior months to get an idea and split it that way on your Bill or CC.

eg, Shell 40.00

Auto Exp 25.00
Draw:Auto 15.00 (just post to Draw or Draw:subcat)

2) For your Rent do the same. Figure % of Square footage...remembering you can't w/o a room you use personally--unless it is divided for biz in some way. If in a small 1 bedroom, then it's a good idea to have a divider and a separate phone to show the clear diff of the room.

Thanks for the replies Veronica. I don't know if it's done differently in the states, but here in Canada we have to report the entire amount of business-use-of-home and vehicle expenses on our tax returns, and then the business portion is calculated and added to the business expenses. If I paid for things like rent and utilities with separate cheques wouldn't it get very confusing? Would QB still track the totals and import them into my tax software like Quicktax?

I also pay most of my bills online and hardly ever write cheques any more. I'm not sure if making two payments online from separate bank accounts would get confusing as well, not to mention credit card payments for gas, auto repairs, etc.

I know you're in the U.S. so I don't expect you to be familiar with the specifics of my situation, but I still appreciate your advice.

Thanks again,

Andrew

Good morning, Andrew:
As you're discovering, there is a diversity of opinion on this subject.  I didn't realize you were in Canada; we have a number of Canadians in these forums and glad to have you posting.  But just in the interest of making sure you know of all the resources available to you....there is a QB in Canada forum available for you as well.
Dennis
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Thanks for the link to the Canadian forum. I will check it out. I must admit that the more I read these forums the more I'm tempted to stay with the pen, paper, and spreadsheet system I'm using now. I have an unopened copy of QB 2007 Pro sitting on my desk, but I'm close to returning it. It just sounds unnecessarily complicated and time-consuming for a small, home business.

I was also reading Quickbooks 2007 All-in-One Desk Reference for Dummies, and it doesn't even contain the phrase "home office". Maybe I'm wrong, but that seems like an indication that QB might be unsuitable for me, despite the QB marketing hype.

Thanks again,

Andrew

You're welcome.
I have seen it posted more than once that the biggest stumbling blocks are more accounting and not quickbooks.  Maybe.  That person was expressing a personal opinion but I'm finding it out to be more true as time goes on.  I am in the middle of  setting up my home office on QB Premiere 2007 myself.  I've also seen advice from very experienced users recommending not to try to understand the whole thing at once.  Just take the bits and pieces that you need to know right now and work from there.
That's basically the drift of that book as well, so that's the strategy I use.  I've worked as a credit manager in construction so I know something about A/R but my knowledge is very limited.  I keep adding bits here and there, largely from what others post in the community. 
Each owner has to make her or his own decisions, but I hope that helps some.
Dennis
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Hi, Andrew,

Like you, I also have a small home-based business, and do a lot of my banking online, as well as using a debit card. Like you, I had a lot of frustration with QB.

Please, please, please DO NOT stick with pen, paper, and spreadsheet! You will spend many more hours trying to figure out what to do and how to do it as opposed to allowing QB to do it automatically, such as reconciling your bank statements, paying vendors, various reports such as cash flow and balance sheet, etc.

May I suggest that you take an online (or in person) course on QB at your local community college? And also perhaps a beginner course (or book) on accounting? My accountant was willing to fix my accounts for me (at her going rate, of course), but I didn't have that kind of money. So I took an online QB course last winter. That course answered a lot of questions that I had with QB. Now I understand QB. You will also help your accountant (recommended!) at tax time that could result in a lower bill.

So please reconsider. A little bit of education can go a long way towards saving time and money.

Claudette

Dennis,
I stopped using Quicken 2005 for personal finance & investment tracking 2 years ago because my data got mixed up with auto-downloads from financial institution with my manual entries. I am considering getting the Quicken 2007 again. But also have just installed my Quickbook 2006 to track some small business sales & maybe use it to track rental property management.

I do not know if I can use QB2006 to track 401k and IRA investments or not?

From your opinion, you are saying better to use Quicken for personal finance? I am trying to ways to simplify my life.

Good morning:
I really don't know about the first question; I'd suggest you reframe that as a separate question and start a new topic.  I don't recall ever seeing that asked before.
As for the second, keep in mind that I am not an accountant per se and this is entirely my personal opinion.  You will find people who do disagree with that...if you check that other thread in the Start and Grow forum (Commingling Part 2) you'll find some sound arguments from somebody who disagrees. 
I will say that I do not use any downloads from my financial institution.  I think the problem is the bank as much as anything but things just don't seem to translate well for me.  I do bank online so I can access personal and business accounts anytime and I doublecheck that against what I have manually entered.  I feel a bit more secure that way and if anybody is doing something they shouldn't, I find out right off. 
What I want to know is - is my data accurate?  If another party like the IRS looks at it, will THEY say its accurate?  How much time and energy do I need to invest to make sure I stay accurate?  In other words, will it work?  For me, it is.  Somebody else may hit on something that answers all that better for them .
Dennis
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Tips and Tricks to Grow Your Business

I just wanted to share my opinion about downloading transactions online from your financial institution.
Personally, I would stick with manually entering transactions, if only to get used to the "Look and Feel" of using Quickbooks.
If I did use the downloading function - I would, but I would not enter any transactions manually - to put it another way, I would choose one or the other - manually, or let the computer do it - not both.
This is an excellent thread !!!

Thanks.

Yes, I have been using Quicken since the early 1990s with manual entries and it worked so well. Till 2005 when I started using downloads auto updates and that was when things starts getting messed up.

Now, I that I have a small business, I do not know whether Quickbook is enough to track everything or should I resuming using Quicken 2007 again by starting over new.

I am an accountant. My husband and I own our own small business (LLC) and I also have a full time (w-2) job along with several clients (1099) that I do bookkeeping for. We have a separate bank account for the LLC. I have everything set up as one QuickBooks company. I use class codes and jobs. Works for me!