Which Tax Form Does Your LLC File? — The Starting Point
| LLC Type | Default Tax Treatment | Form Filed | Bookkeeping Complexity |
|---|---|---|---|
| Single-member LLC | Disregarded entity | Schedule C (on owner's 1040) | Low–Moderate |
| Multi-member LLC | Partnership | Form 1065 + Schedule K-1 per member | Moderate |
| LLC with S-corp election | S-corporation | Form 1120-S + Schedule K-1 per shareholder | High |
| LLC with C-corp election | C-corporation | Form 1120 | High |
Most small business LLCs are either single-member or multi-member with default taxation. The S-corp election is a separate IRS choice made using Form 2553 and is worth considering when net profit consistently exceeds $50,000–$80,000 per year.
Single-Member LLC Bookkeeping — What You Need Each Month
A single-member LLC with no S-corp election is the simplest structure. All business income and expenses pass through to your personal tax return on Schedule C. At Sharma Jyoti and Co, here is what we handle monthly for single-member LLC clients:
- Bank reconciliation — every transaction matched to bank statement, no unmatched items
- Expense categorization — all expenses coded to the correct Schedule C line (advertising, contract labor, office, rent, utilities, travel, meals 50%, auto/mileage)
- Revenue tracking — all income sources recorded and reconciled to deposits
- Contractor tracking — 1099-NEC list maintained throughout the year so January is not a scramble
- Mileage log verification — business mileage documented per IRS requirements (date, destination, business purpose, miles)
- Home office support — square footage ratio and direct/indirect expense split documented if applicable
- Monthly P&L — delivered within 5 business days of month-end
- Quarterly estimated tax data — Q4/Q1/Q2/Q3 income summaries for your estimated payments
The #1 single-member LLC bookkeeping mistake: mixing personal and business transactions in the same bank account. This forces your CPA to sort transactions at year-end (at $200–$400/hr), creates IRS audit risk, and undermines your LLC's liability protection. Open a dedicated business checking account from day one.
Multi-Member LLC Bookkeeping — What's Different
A multi-member LLC is taxed as a partnership. This adds a layer of complexity that does not exist for single-member LLCs:
- Capital accounts: Each member's initial contribution, subsequent contributions, distributions taken, and profit/loss share must be tracked separately. This is the foundation of the K-1.
- Profit/loss allocation: Unless the operating agreement specifies otherwise, profit and loss are allocated based on each member's ownership percentage. Your bookkeeper tracks the running allocation monthly.
- Distributions vs draws: Each distribution must be recorded against the member's capital account. Unequal distributions require careful documentation.
- Form 1065 workpapers: The CPA needs a full trial balance, capital account schedule, member distribution summary, and 1099 contractor list to prepare Form 1065 and issue K-1s.
At Sharma Jyoti and Co, multi-member LLC bookkeeping starts at $300/month. We maintain individual capital account ledgers for each member and deliver the complete Form 1065 workpaper package to your CPA by early February.
S-Corp-Elected LLC Bookkeeping — The Additional Requirements
When an LLC elects S-corp taxation (Form 2553), bookkeeping becomes significantly more involved. The IRS requires the owner-employee to pay themselves a "reasonable salary" — and that salary must flow through payroll with proper FICA withholding and reporting.
| Additional Requirement | Why It Matters |
|---|---|
| Payroll records for owner-employee salary | IRS can reclassify distributions as wages if no payroll — triggers back FICA + penalties |
| Distributions vs salary documentation | Must be clearly separated — salary on W-2, distributions on K-1 (not subject to FICA) |
| Shareholder loan accounts | Any money paid to or from the owner outside of salary/distributions needs a documented loan agreement and interest |
| Form 941 quarterly payroll filings | Owner payroll creates quarterly 941 obligations even if you use Gusto or QuickBooks Payroll |
| Basis tracking | S-corp shareholders cannot deduct losses beyond their basis — your bookkeeper tracks this annually |
Required Records for Any US LLC
Regardless of LLC type, the IRS requires you to maintain records supporting every deduction for at least 3 years (7 years for employment tax records). In practice, at Sharma Jyoti and Co we maintain:
- Bank and credit card statements — all accounts, every month
- Receipts for any business expense over $75 (IRS threshold for documented proof)
- Contracts and invoices for contractor payments
- W-9 forms for every contractor before first payment
- Mileage logs if deducting auto expenses
- Home office measurement and utility/rent records if deducting home office
- Asset purchase documentation for any equipment, furniture, or software costing $2,500+
How Much Does LLC Bookkeeping Cost?
| Provider Type | Monthly Cost | What You Get |
|---|---|---|
| DIY (QuickBooks or Wave) | $0–$30/mo software | Your time — 3–8 hrs/month. Errors common without accounting training. |
| US freelance bookkeeper | $500–$1,500/mo | Monthly reconciliation, P&L, basic reports |
| Bench / Pilot / Bookkeeper360 | $299–$900/mo | Remote bookkeeping, QuickBooks or proprietary software, US-based review |
| Sharma Jyoti and Co | $200–$500/mo | Bank rec, P&L, expense coding, 1099 tracking, year-end CPA workpapers. ICAI CA firm. |
| CPA doing bookkeeping | $1,500–$3,500/mo | Qualified but overpriced for routine monthly work |
Frequently Asked Questions
Monthly bank reconciliation, expense categorization to Schedule C lines, revenue tracking, 1099 contractor tracking, mileage logs, and quarterly estimated tax data. At Sharma Jyoti and Co we handle all of this from $200/month, including year-end Schedule C workpapers for your CPA.
Everything a single-member LLC needs, plus capital account tracking per member, profit/loss allocation records, and distribution documentation. The CPA needs this for Form 1065 and Schedule K-1s. At Sharma Jyoti and Co multi-member LLC bookkeeping starts at $300/month.
Consider it when net profit consistently exceeds $50,000–$80,000/year. Paying yourself a reasonable salary and taking the rest as a distribution saves self-employment tax (15.3% on the distribution portion). But S-corp bookkeeping is more complex — payroll records, distribution documentation, and Form 1120-S require a proper bookkeeper, not DIY.
Yes — legally required in most states and practically essential for bookkeeping. Commingling personal and business funds can pierce the corporate veil (eliminating your liability protection) and creates IRS audit risk. Open a dedicated business checking account the week you form the LLC.
US bookkeepers: $500–$1,500/month. Bench/Pilot: $299–$900/month. At Sharma Jyoti and Co: $200–$500/month for the same monthly bookkeeping work plus year-end CPA workpapers. We are an ICAI CA firm — your US CPA reviews our work and files your return.