Accounting is the system that records what your business earns, owes and owns, then turns that record into reports you can act on. Four habits cover most of what a small business needs: keep business money in a business bank account, record every transaction as it happens, read three reports every month, and pay in enough tax during the year. The rest is detail, and the detail is where owners get hurt.
The five terms everything else is built on
Assets are what the business owns: cash, equipment, inventory, money customers owe you. Liabilities are what it owes: loans, card balances, unpaid bills, sales tax you collected but have not remitted. Equity is your stake in what is left. Revenue is what you earn from selling. Expenses are what it costs to operate.
Those five sit inside one equation:
Assets = Liabilities + Equity
That equation is why bookkeeping is called double-entry. Every transaction touches at least two accounts, and both sides stay equal. Buy a laptop with cash and one asset converts into another. Buy it on a credit card and assets and liabilities both rise. If your books do not balance, something is missing, not just miscategorized.
Bookkeeping is not accounting
Bookkeeping is the recording: coding transactions, matching bank feeds, collecting receipts, posting payroll. Accounting is what you do with the record: financial statements, tax positions, entity decisions, pricing. You cannot skip the first and expect the second to mean anything.
Cash or accrual: choose on purpose
| Cash basis | Accrual basis | |
|---|---|---|
| Revenue recorded | When the money arrives | When you earn it and invoice |
| Expenses recorded | When you pay | When you incur the cost |
| Suits | Service businesses, simple operations | Inventory, long payment terms, lenders or investors |
| Strength | Follows your bank balance | Shows real profitability by period |
| Weakness | A big December invoice can hide a bad year | Can show profit while the account is empty |
Many small service businesses can use cash basis. Businesses carrying inventory, billing on long terms, or seeking bank financing usually end up on accrual. A gross receipts test limits who may use the cash method, and it is indexed for inflation, so check the current figure. Whichever you pick, you adopt it on your first return, and switching later generally requires IRS consent on Form 3115.
The three statements, and the question each one answers
Profit and loss. Did we make money over this period? Revenue minus expenses for a month, quarter or year.
Balance sheet. What do we own and owe right now? A snapshot on a single date, and where the accounting equation has to hold.
Cash flow statement. Where did the cash actually go? Profit and cash are different. A profitable business with slow-paying customers can still miss payroll.
Read all three together, monthly, on the same day each month. One statement in isolation misleads.
Thresholds people get wrong
Round numbers travel further online than the exceptions attached to them. These are the ones we correct most often.
| Number you have heard | What it actually means |
|---|---|
| $2,000 for 1099-NEC and 1099-MISC | Applies to payments made after December 31, 2025. Forms for tax year 2025, filed in early 2026, still used the old $600 threshold. The amount may be inflation-adjusted starting in calendar year 2027. |
| $600 for attorney fees | Unchanged. Gross proceeds paid to an attorney (Form 1099-MISC, Box 10) still report at $600. This catches businesses that used legal counsel and assumed one blanket threshold. |
| $10 for royalties | Unchanged, as are substitute payments. Fishing boat proceeds have no minimum at all. |
| More than $20,000 and more than 200 transactions | The Form 1099-K rule, restored by OBBBA. Both conditions must be met. If you take money through Stripe, PayPal, Square or a marketplace, this governs the form you receive, not the $2,000 rule. |
| $75 for receipts | Narrow. It comes from the substantiation rules for travel, meals, gifts and listed property such as vehicles. Lodging needs a receipt at any amount. Ordinary costs like software, rent and subcontractors stay under the general recordkeeping duty. Even under $75 you must still record amount, time, place and business purpose. Only the paper receipt is excused. |
| $1,000 for quarterly estimated tax | Correct for individuals, but not a standalone trigger. See below. Corporations use $500. |
| $280,000 to max out a retirement plan | Not correct for any plan and entity combination. See the FAQs. |
Estimated taxes: the safe harbors matter more than the trigger
Individuals generally must pay estimated tax if they expect to owe $1,000 or more when the return is filed. But no underpayment penalty applies if withholding and estimated payments total at least the smaller of 90% of this year's tax or 100% of last year's tax, rising to 110% for higher-income taxpayers. If your spouse has a W-2 job, raising their withholding can cover the household safe harbor without you making a single quarterly payment.
There is also a full exemption: if you had no tax liability for the prior year, were a US citizen or resident all year, and that prior year covered twelve months, estimated tax is not required.
Federal installments for calendar-year individuals fall in mid-April, mid-June, mid-September and mid-January of the following year, shifting for weekends and holidays. If your income is seasonal, which describes a lot of Orlando, Jacksonville and Miami businesses, equal installments can produce a penalty even when the annual total is right. The annualized income installment method on Form 2210 lets you pay in line with when you actually earned.
What OBBBA made permanent, and what it did not
Permanent: the Section 199A qualified business income deduction, 100% bonus depreciation for qualified property acquired after January 19, 2025, and the increased Section 179 expensing limit ($2.5 million for tax years beginning in 2025, inflation-adjusted after that).
Temporary, and easy to over-plan around: the deductions for tips and overtime run only through 2028 and are capped. The raised SALT cap rises slightly each year through 2029, then reverts to $10,000 in 2030. Treating those as permanent breaks any multi-year plan built on them.
The Florida part
Florida has no state personal income tax. If you are a sole proprietor, partner, LLC member or S-corp shareholder, your business profit is taxed federally and not by Florida. That is genuinely valuable, and it is also the source of the most common local mistake: no state income tax does not mean no state filings.
- Sales tax. The state rate is 6%, plus a county discretionary sales surtax that differs by county and changes. Orange, Duval and Miami-Dade are not the same. Register with the Florida Department of Revenue before your first taxable sale and check the current surtax table.
- Reemployment tax. With employees, you owe Florida reemployment tax on a low per-employee wage base, at an initial rate the state sets for new employers. Confirm the current rate and base.
- Sunbiz annual report. Florida entities file by May 1. It is a state filing, not a tax return, and the late fee is steep and not waived.
- Florida corporate income tax. C-corporations and entities taxed as corporations do pay Florida income tax, and must declare estimated tax when the year's liability will exceed $2,500. Those installment dates do not match the federal ones. Check Form F-1120ES.
- Hurricane season. Keep records somewhere that survives a roof failure. Cloud accounting with attached documents is the simplest answer. After a declared disaster the IRS and the Department of Revenue often postpone deadlines for affected counties, but no relief program reconstructs records you never backed up.
If you are a non-resident founder
You can form a US company as a non-resident, and the IRS's Instructions for Form SS-4 cover how a foreign responsible party completes the application. The surprise comes afterward. A foreign-owned single-member LLC is generally a disregarded entity but must still file a federal information return every year, even with zero income and zero activity, and the penalty for missing it is substantial. Whether you owe US income tax is a separate question, turning on effectively connected income and treaty position. Get that answered before your first year closes, not after.
How long to keep records
Three years from filing is the general rule. Keep six years if you might have understated income by more than 25%, and employment tax records for four years after the tax is due or paid, whichever is later. Keep records supporting an asset's cost until you dispose of it, then for the applicable period after. If a return was never filed, or was fraudulent, there is no time limit.
When to bring in an accountant
This is our recommendation, not a legal rule, and no revenue figure makes professional help mandatory. Complexity drives it, and complexity comes from:
- Running payroll, or paying contractors you have to report
- Electing S-corp status, which adds a separate return and reasonable-compensation rules
- Holding inventory
- Operating across state lines or across borders
- Any notice from the IRS or the Florida Department of Revenue
- Buying, selling or restructuring the business
Worth knowing: a single-member LLC with no election is a disregarded entity for federal tax. It files no separate federal income tax return, and the activity goes on Schedule C of your Form 1040. That is the most common structure in Florida and no harder to file than a sole proprietorship. S-corps (Form 1120-S) and C-corps (Form 1120) are a real step up.
What to do next
- Open a business bank account and stop putting business spending on personal cards.
- Pick accounting software with a live bank feed and connect it.
- Build a chart of accounts that matches how you make decisions, not a 200-line default list.
- Decide cash or accrual deliberately, and write down why.
- Register with the Florida Department of Revenue if you sell anything taxable, and calendar May 1 for your annual report.
- Check your estimated tax safe harbor position now, not in December.
- Close the books monthly and read all three statements on the same day each month.
Accounting BOSS works with small business owners in Orlando, Jacksonville and Miami, and with non-resident founders forming US companies. Get in touch for a consultation.
This is general information, not tax advice for your situation, and reading it does not make you a client. Rules and figures change — verify anything time-sensitive before you act on it. We'll talk it through with you free.
Common questions
Check the year and the box before you decide. The $2,000 threshold applies to payments made after December 31, 2025. Forms covering tax year 2025, which were filed in early 2026, still used the old $600 threshold. It is also not a single blanket number: gross proceeds paid to an attorney still report at $600, royalties and substitute payments at $10, and fishing boat proceeds have no minimum. Separately, if you receive payments through Stripe, PayPal, Square or an online marketplace, Form 1099-K is its own regime, reportable only when payments exceed $20,000 and there are more than 200 transactions.
Only if the safe harbors do not already cover you. Individuals generally must pay estimated tax when they expect to owe $1,000 or more at filing, but no underpayment penalty applies if your withholding and payments total at least the smaller of 90% of this year's tax or 100% of last year's tax, or 110% if you are a higher-income taxpayer. If you had no tax liability at all in the prior year, were a US citizen or resident for the whole year, and that year covered twelve months, estimated tax is not required. Corporations use a $500 threshold, not $1,000. And if your income is seasonal, four equal payments may not be the right shape; the annualized income installment method on Form 2210 exists for exactly that.
That rule is much narrower than it sounds. It applies to travel, meals, gifts and listed property such as vehicles, which are subject to heightened substantiation rules. Lodging requires a receipt at any dollar amount. Ordinary business costs like software, rent, supplies and subcontractors are governed by the general recordkeeping requirement, with no $75 exemption. And even below $75 you must still record the amount, the time, the place and the business purpose. Only the physical receipt is excused, never the record. Owners who stop tracking small purchases lose those deductions on audit.
Cash basis if you run a straightforward service business and want your books to track your bank account. Accrual if you carry inventory, invoice on terms, or need financial statements a bank or investor will take seriously. A gross receipts test limits who can use the cash method and it is indexed for inflation each year, so confirm the current figure before assuming you qualify. You adopt a method on your first return, and changing later generally requires IRS consent on Form 3115.
Much less than the $280,000 figure that circulates online, at least for a solo 401(k). Using the 2026 limits, the overall cap on additions to a defined contribution plan is $72,000, the employee deferral limit is $24,500, and compensation counted for plan purposes is capped at $360,000. An S-corp shareholder-employee with a solo 401(k) needs roughly $190,000 in W-2 wages to reach the overall cap, because the deferral does much of the work. A SEP-IRA has no employee deferral, so the same owner would need about $288,000 in wages. A sole proprietor's contribution is calculated on net self-employment earnings after the deduction for half of self-employment tax, which works out near 20%, so a SEP would take roughly the full compensation cap. Solo 401(k)s also allow catch-up contributions of $8,000 at age 50 and over, and $11,250 for ages 60 to 63. SEP-IRAs do not.
Almost certainly yes. A single-member LLC owned by a foreign person is generally treated as a disregarded entity, but it must still file a federal information return each year, even with zero revenue and zero activity. The penalty for failing to file is substantial. Whether you also owe US income tax is a separate analysis that depends on whether your income is effectively connected with a US trade or business and on any treaty that applies. Florida having no personal income tax does not change any of this.