So I started doing freelance graphic design last year and made about $8k before I actually filed the LLC paperwork. Now I'm trying to get my books straight and my accountant is asking questions I don't know how to answer. Do I need to report that income under the LLC even though it didn't exist yet? Am I screwed?
LLC
My business earned money before I registered the LLC
Not screwed but you might need to amend some things. The LLC didn't exist, so that income was earned as a sole proprietor (or whatever entity you were before). You'd report it on your pe rsonal return under your SSN, not the LLC's EIN. The LLC only covers income from the date it was officially formed.
This. And keep good records of what came in before vs after. Your accountant probably just wants to see a clear cut-off date. Also, if you already deposited that money into the LLC bank account, you'll want to document it as an owner contribution or a transfer.
lol @ "am I screwed" — you made 8k, not 8 million. you're fine. just tell your accountant the truth.
Hey, give them a break. The IRS stuff can be scary if you've never dealt with it. Better to ask than guess.
OP, did you file a Schedule C for last year? If you already reported the income as self-employment, you might be totally fine. The LLC registration is more about liability than taxes, anyway.
I did file a Schedule C, yes. But my accountant didn't seem to care about the LLC dates at all, which is why I got confused.
Your accountant may have already handled it correctly without explaining. But if they're asking questions about the dates, it's probably because they want to file the first LLC return correctly. Just get them the exact formation date and your bank statements.
Honestly the bigger issue might be the bank account. Did you mix personal and business money? That's the mess that'll bite you later.
commingling funds is the real crime here
To parks_and_rekt's point — this is why people say don't open the LLC bank account unt il the LLC is approved. But it happens all the time. Just don't keep doing it.
Also worth checking your state's rules. Some states care more about the exact start date for franchise tax or annual report purposess. That could be what your accountant is fishing for.
Yep. And if you're in California, for example, the the first year franchise tax is $800 regardless. So the pre-LLC income doesn't matter for that, but the date does.
Not California but I had a similar thing in Texas. Nobody cared about the pre-LLC money as long as it was claimed on my personal return.
so basically: relax, give your accountant the dates, don't commingle, and next time form the LLC before you invoice. easy.
Yeah. And if you're still worried, just ask your accountant to walk you through the first return line by line. You're paying them, after all.