Setting Up Sole Proprietorship Books

Don Quixote de la Mancha quixote at dulcineatech.com
Thu Dec 31 13:09:12 EST 2009


Tomorrow (January 1st) I'm going to switch my personal and sole
proprietorship bookkeeping from massive OpenOffice spreadsheets to
GnuCash.

(The sole proprietorship is in addition to the corporation that I've
previously posted about.)

Does anyone have any advice for setting up sole proprietorship books?

In the US, sole proprietorships are taxed as the person who owns the
business - one records income and loss on one's personal 1040 Schedule
C.

One can have a separate Employer Identification Number, but my
understanding is that if one doesn't have any employees, one can just
use one's own Social Security Number.  That's what I've always done,
and the IRS has never complained.

Should I have just one GnuCash file for both my business and myself
personally, or should I have separate files for each?  If I have
separate files, does GnuCash support having multiple files open
simultaneously?

I did some Google and list archive searches, but didn't find much insight.

I don't expect the proprietorship to ever have any employees.

I put money into the business, as well as do Owner Draws fairly
frequently.  That's why I'd want both files open at once, if I were to
use two distinct files.  I can see how drawing and investing would be
easier with just one file, but the accounts one would want would be
quite different for personal and business use.

There are some messages in the archives that suggest Owner Draws ought
to be treated like employee wages, where the employee happens to be
the owner.  But that's not quite right for taxation purposes.  It
doesn't matter how much or little the owner draws, what gets taxed is
the difference between the business' income and expenses.  So one
could leave all the money in the business, with no Owner Draws at all,
or one could draw all the available money.  In both cases, one pays
the exact same amount of tax.

Most of the income for the proprietorship comes from consulting (a
service).  Most of the expenses are related to advertising.  I give
away a free CD of my piano music as one form of advertising, so there
are expenses for the CD inventory.  I burn and label them myself, so I
spend money on blank CD-Rs, inkjet ink, cases and paper, as well as
postage.  I also pay for web hosting.

It's not completely urgent to get this all set up today; any time in
the next week or two would be OK.  I'd just keep using those
spreadsheets, then manually copy the transaction once I have the
GnuCash file(s) configured.

Thanks!

Don Quixote
-- 
Don Quixote de la Mancha
quixote at dulcineatech.com
http://www.dulcineatech.com

   Dulcinea Technologies Corporation: Software of Elegance and Beauty.


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