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The Difference Between SMB Accounting and LLC Accounting

Author : Bill Gerber
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SMB. LLC. Inc. GAAP. The business world is full of acronyms that you may never give much thought to. After all, you know what you know, which is how to run a successful company in your industry.

Let’s look at some of these terms as they relate to accounting and find out exactly what you need to know.

LLC Accounting
An LLC, a Limited Liability Corporation, can describe any company, from a sole proprietorship that files a Schedule-C tax return to a business with revenues in the millions. An LLC may have one owner or many.

The important aspect of an LLC is that although the owners of an LLC aren’t personally liable for actions of the LLC, the profits, losses and tax responsibilities do belong to the owners. If you file your small business as an LLC, you may not see much difference between accounting practices for a sole proprietorship and what is required with an LLC.

Corporation, Incorporated
On the other hand, a corporation, which has a business name followed by the letters Inc., is considered an entity separate from the corporation’s owners. The corporation, as an entity, pays federal taxes and must keep separate accounting records, along with separate bank accounts, credit or charge cards, and the like. In fact, owners of a corporation may pay themselves a salary, but they must take care to keep business and personal expenses completely separate.

This is where accounting can get tricky. Corporations are expected to adhere to GAAP principles of accounting, and often need the assistance of professional bookkeeping services to ensure accuracy of their financial statements.

Defining an SMB
Now, what about that term we hear bandied about on the Internet so often: SMB? It stands for Small-to-Mid-size (or medium-size) Business. An SMB can be an LLC, a corporation or, rarely, a sole proprietorship on the verge of breaking through beyond that status and expanding.

Owners of SMBs may do their own books, or they may hire an accounting firm. They may use GAAP standards, or still keep their books with an old ledger system using cash-based accounting. If you run an SMB, you know it. And if your SMB is growing and you need accounting help—you’ll know that, too.

If that’s the case, why not call AccountingDepartment.com? We can help.

 
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