How to Start a Virtual Bookkeeping Business

If you’re looking for a self-employment opportunity that comes with low startup and overhead costs, delivers a flexible schedule, and allows you to do nearly all of your work virtually, starting a bookkeeping business may be a perfect fit for your aspirations. According to ZipRecruiter, as of April 24, 2019, most freelance bookkeepers in the U.S. reported annual income that fell between $34,000 and $56.000, with standard hourly fees ranging between $17 and $27 per hour. If you learn how to start a virtual bookkeeping business, you won’t become an overnight billionaire. You can, however, make a respectable income working from home and providing a much-needed service. Think about it; EVERY business out there needs to keep accurate financial transaction records. Bookkeepers are a necessity! But how do you start a virtual bookkeeping business?

Steps to Starting a Small Bookkeeping Business

For those of you who have been wondering about how to start a virtual bookkeeping business, I’ve listed many of the details you’ll need to address. This information is intended to give you a general sense of what’s involved and is not a substitute for professional legal, accounting, and tax advice.

1. Learn the ropes if you’re new to the industry.

Building your knowledge and skills by working for an accounting or bookkeeping firm can prepare you to branch out on your own. This step is critical in learning how to start a virtual bookkeeping business. It’s especially useful to become proficient with accounting and bookkeeping basics such as double-entry accounting, general ledger preparation, and how to classify and record financial transactions. Getting experience will also help you become more familiar with bookkeeping software, the types of clients you will enjoy working with most, what services you want to provide when you launch your business, and the rates that customers are willing to pay.

Look for opportunities for education and skills development, too. Many community colleges offer continuing education courses in professional bookkeeping, and there are a variety of online bookkeeping programs online.

Also, consider joining a bookkeeping group or association that offers information and support from peers in the industry. Online communities, such as groups on Facebook and LinkedIn, can be helpful outlets for bouncing ideas and asking questions. A few that you might find value in include:

2. Decide what bookkeeping services you want to offer.

Some examples of what bookkeepers do for clients include:

  • Preparation of basic financial statements (balance sheet, income statement, cash flow statement)
  • Accounts payable management
  • Accounts receivable management
  • Invoice preparation
  • Payroll services
  • Tracking long-term assets (e.g., equipment, machinery)

3.  Consider getting certified in bookkeeping.

Because bookkeepers handle confidential information and financial data, clients will want to be sure they choose a professional who is knowledgeable, reliable, and trustworthy. Usually, bookkeepers in the United States do not have to be licensed or certified. However, becoming licensed or having a certification behind your name can instill customer trust and confidence in your abilities. 

Below are several certifications that can give you credibility and possibly a competitive edge:

  • Certified Public Bookkeeper (C.P.B.) via the National Association of Certified Public Bookkeepers (NACPB)
  • Certified Bookkeeper (C.B.) via the American Institute of Professional Bookkeepers
  • College bookkeeping program
  • Accounting software certification via the software provider such as QuickBooks ProAdvisor, Zoho Books Advisor, or Xero Advisor

4. Tackle the legal aspects of starting a bookkeeping business.

Starting a bookkeeping business requires paying attention to some essential legal and tax matters. To ensure you have accurate information, know what you’re responsible for, and understand how your decisions will affect you, seek the professional advice from an attorney, accountant, and tax advisor.

Select a business name.

As you think about what you’ll call your business, make sure you check to make sure no other companies have claimed it in your state. Use CorpNet’s free Corporate Name Search tool as a starting point for determining if your name is available. If you think you might want to expand your business to other states in the future, I recommend doing a trademark search, as well. If you find that your desired name is available, you may want to reserve it so that it’s yours when you’re ready to register your business entity. Most states allow name reservations and the United States Patent and Trademark Office allows businesses to reserve trademarks (for a maximum of three years) by submitting an “intent to use” application. In most states, registering your business entity will automatically protect your business name (provided the name is available if you haven’t reserved it) in the state. However, some states may require additional steps to protect your name within their borders. A federal trademark will protect your name in all 50 states. Note that bookkeepers that operate as sole proprietorships and opt to use their first and last names in the business name (e.g., Jane Sylva’s Bookkeeping Services) do not have to reserve or register their names. If they want to use a fictitious name (e.g., Precision Bookkeeping Services), however, they must file a D.B.A. (Doing Business As) or equivalent application. Fictitious name registration does not protect a business name, but rather it gives the business owner authorization to operate the business under that name and informs the public of who owns the business.

Choose a business structure for your bookkeeping business.

The business entity type you select for your business will have legal and tax implications. Also, some structures are more complicated and costly to operate than others. While operating as a sole proprietorship offers simplicity, it doesn’t provide the business owner any protection of personal assets because the business and the owner are considered the same legal and tax-paying entity. Several structures that limit personal liability include Limited Liability Company, S Corporation, and C Corporation.  CorpNet’s Business Structure Wizard can help you identify the business structures that might be a good fit, which can help you as you discuss the pros and cons of entity types with your attorney and tax advisor. The process for registering a business entity with the state involves filing the appropriate forms and paying the applicable fees. Requirements vary by state and type of business structure. To help you save on your legal costs and ensure your paperwork is completed accurately, CorpNet’s filing experts can handle your business formation filings for you.

Appoint a registered agent.

When formally registering a business, you’ll need to designate a registered agent authorized in your state to accept service of process (official government documents, legal notices, etc.) on behalf of your business. CorpNet offers registered agent services in all 50 states, which makes it easy if bookkeepers decide to expand their services or relocate to another state.

Get an EIN (Employer Identification Number).

Even if you don’t have employees, you may need an E.I.N. Also known as a Tax I.D. Number, an EIN is a unique nine-digit number used for identifying a business on tax forms and other documents. Most banks will require an EIN before it will open a bank account for a business. EINs are free and obtained through the I.R.S. If you don’t have the time or don’t want to handle the paperwork on your own, CorpNet can help you apply for your EIN.

Understand your tax obligations.

In addition to federal income tax (and self-employment taxes if the business is a pass-through entity), there may be other taxes at the state and local level. The taxes and fees a bookkeeping business must pay will depend on the business structure and where the company is located. Some of the possibilities include state and local income tax, gross receipts tax, franchise tax, and state and local sales tax.

Get required business licenses and permits.

Although no bookkeeper license is required, bookkeepers may have to obtain other licenses or permits to operate a business from their location. It’s essential to check with the state, county, and local authorities to find out if anything is required—such as a general business license, home occupation permit, or anything else—to run the business legally. CorpNet can also help you identify which licenses and permits you will need.

Determine what contracts you’ll need.

As a self-employed business owner, it pays to make sure you protect yourself. Having the right agreements in place can help! A Bookkeeping Services Agreement signed by you and your clients can set forth the important details of your relationship. Examples of the information that goes into a services agreement include the bookkeeper’s and client’s names and addresses; start date and duration of the agreement; services the bookkeeper will and will not provide; how much the client will pay for services; billing terms; and dispute resolution. If confidentiality isn’t addressed in the services agreement, there might be a separate non-disclosure or confidentiality agreement, as well, to protect yours and your client’s private information. You can find various bookkeeping contract templates online to use as a starting point. An attorney can help you identify what contracts you need and ensure that the language within them covers all the bases.

Learn about ongoing business compliance requirements.

With any business, there is some level of ongoing compliance. From filing and paying taxes on time to submitting annual reports to renewing licenses and permits, and more, it’s critical to know what you must do and by when. Fortunately, with the CorpNet B.I.Z. (Business Information Zone), you have free access to monitoring your compliance requirements.

5. Open a business bank account.

Open a bank account and credit card exclusively for your bookkeeping business, and keep your personal and business finances separated. As a bookkeeper, you know how important that is for keeping accurate records. Mingling personal and business transactions (e.g., paying for personal purchases with a business check) could mean “piercing the corporate veil” and cause a bookkeeping business’s owner to lose the personal liability protection that they had through their LLC or corporation.

6. Obtain the tools and technology you’ll need.

A virtual bookkeeping business run out of a home has relatively few startup needs. Still, there are equipment and technology tools you’ll want to invest in so that you can work productively and provide exceptional service to your clients.

  • Core accounting software – The bookkeeping software you need will depend on what you and your prospective clients prefer. QuickBooks Online a widely used cloud-based solution. Others options that you might explore depending on the types of clients you serve and the services you provide include FreshBooks, Zoho, Sage Intacct, and Xero.
  • Document management software – You and your clients will exchange a lot of information. Consider what solution(s) will enable you to receive, share, and file documents and data effectively. Examples of tools that can help include Google Drive, G Suite, Hubdoc, Expensify, Wave, Shoeboxed, OneDrive, and Dropbox.
  • Project management app – When managing work for multiple clients, it can be helpful to have a way to keep track of all deliverables. Project management software—such as Trello, Asana, Active Collab, and Slack—can help things from falling through the cracks.
  • Computer – After you determine the software you’ll need, you’ll want to make sure that the computer you use is compatible with the desktop versions if you intend to use them. Also, take the necessary precautions (anti-virus software with malware protection) to prevent cybersecurity disasters.

7. Protect yourself with business insurance.

To protect yourself in the unlikely event of a legal claim against your business, consider getting peace of mind through insurance policies. Types of insurance many bookkeepers secure include professional liability (sometimes called “errors and omissions”) and general liability. It would be helpful to check with a trusted insurance agent to get recommendations, and also with the state to see if any type of insurance is required for your bookkeeping business.

8. Prepare to market your virtual bookkeeping business.

Consider both traditional and online marketing tactics to help you get the word out about your business. If you join local networking groups, business cards and brochures can provide a tangible way to make yourself memorable when meeting new connections face to face. Online marketing can be especially impactful and allow you to reach prospective customers everywhere across the United States. Make sure that your website and LinkedIn profile showcase your education, credentials, and services. And please, upload a professional-looking headshot on LinkedIn. Clients will be far less likely to dig deeper into your profile if you use the shadowy default image as your profile picture. If you’ve created a Facebook business page, which I recommend highly, targeted ads and promoted posts provide a cost-effective way to expand awareness of your bookkeeping services.

Ready, Set, Launch Your Virtual Bookkeeping Business

Now that you know how to start a virtual bookkeeping business, what’s stopping you? CorpNet is here to help you reserve your business name, file all of your business registration forms, obtain your E.I.N., apply for licenses, and more. Contact us today to talk with one of our filing experts. We guarantee you’ll be satisfied with our exceptional, affordable service! Also ask about how you can earn additional income by joining the CorpNet Partner Program. It’s free to join, and it allows you to expand your services and revenue potential through either reselling CorpNet services or referring customers to us.

2019-05-03T16:52:14-07:00 May 6th, 2019|Categories: Seed and Development, Startup and Launch|Tags: , , |

About the Author:

Nellie Akalp
Nellie Akalp is an entrepreneur, small business expert, speaker, and mother of four amazing kids. As CEO of CorpNet.com, she has helped more than half a million entrepreneurs launch their businesses. Akalp is nationally recognized as one of the most prominent experts on small business legal matters, contributing frequently to outlets like Entrepreneur, Forbes, Huffington Post, Mashable, and Fox Small Business. A passionate entrepreneur herself, Akalp is committed to helping others take the reigns and dive into small business ownership. Through her public speaking, media appearances, and frequent blogging, she has developed a strong following within the small business community and has been honored as a Small Business Influencer Champion three years in a row.

Leave a Reply