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How do you recommend setting up an accounting system for the…

How do you recommend setting...
How do you recommend setting up an accounting system for the existing business I am purchasing? I currently have an LLC. Should I start over or take on with they have been doing? Any tax implications?
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Answered in 2 hours by:
3/13/2018
Carter McBride
Carter McBride, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 1,276
Experience: Adjunct Professor
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Hey! I'm Carter, I'm a CPA.
I'd stick with their current system to start. If you need a different integration with other companies, then you're fine.
For accounting on the tax return, if you change anything, you will need to do a Form 3115 with every change you want to make. Then you need to recalculate the old books to be on the new accounting methods which leads to a 481(a) adjustment. That can be very costly to get done and could cause additional tax due. That's another reason to keep it as it is.
If you need anything else, let me know. If not, please leave a rating. Thanks!
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Customer reply replied 4 months ago
I’m making it an asset sale and rolling it into my own LLC. Does that change anything?
You wouldn't need to do a 3115 then.
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Customer reply replied 4 months ago
But if I’m doing it under my own LLC, would I start from scratch with my own methods?
Yup. You can start from scratch with your own accounting methods, which is why you would not need to do a 3115.
Just to clarify, by accounting systems that means like QuickBooks. Accounting methods means things like accrual vs. cash.
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Customer reply replied 4 months ago
Oh thanks for the clarification. I meant methods. Last question, where could I find what’s considered best practices in methods?
There is not really a best practices and methods guide. If you're eventually going to look for bank financing, it's recommended to use the accrual method of accounting.
Carter McBride
Carter McBride, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 1,276
Experience: Adjunct Professor
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Carter McBride and 87 other Tax Specialists are ready to help you
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Customer reply replied 4 months ago
Thanks!
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