The purpose of QuickBooks Online is to generate Profit & Loss Reports that are used to:
file your 1120s Business Tax Return
calculate Quarterly Estimated Personal Income Tax Payments
review your reasonable compensation every quarter
understand the performance of your company over time
Profit & Loss Reports are simply a collection of business income and expense transactions. These transactions occur inside checking and credit card accounts. The following steps will guide you through connecting those accounts so that we can extract the business transactions. You will even connect personal accounts if they contain business transactions. These accounts are carefully notated so that we exclude the personal activity, capture the business activity, and then disconnect them once you've stopped using them for business. Ask us on Slack if you aren't sure if a transaction is business or personal.
Import Business Transactions
Write down all the checking and credit accounts, business or personal, that contain any business activity as of your current (or anticipated) S Corp election effective date. Ask us if you don't know that date. Common accounts to connect are:
LLC Checking - this is the one opened with the EIN of your LLC
LLC Credit Card - ideally it's opened with the EIN, but often that is so young that you will have to use your SSN. That is ok, just be sure to only use it for business transactions.
Personal Checking - if you were a sole proprietor chances are you used your personal checking account for business income and expense. while you transition to your new LLC Checking account, please connect your personal checking account because it contains that previous business transaction data we want to put in QBO
Personal Credit Card - If you used a credit card to buy anything for the business then connect it now. If you decide to only use it for the business going forward then you may keep it connected. Otherwise, stop using it for business so it can be disconnected once all the business transactions are extracted.
The business accounts stay connected to QBO. The personal accounts are only temporarily connected to import business transactions. Run all your business income and expense activity through the business accounts. If you haven't already, make it a top priority to update your customers and vendors with your business checking and credit account details. Make a note of recurring business transactions found in personal accounts and start transitioning them to LLC Checking and Credit Card accounts.
Follow these steps to connect each of those accounts and import transactions. Quickbooks will automatically name them. Please add "PERSONAL" to any personal accounts. This reminds us to: exclude all transfers and personal transactions, capture the business transactions, and eventually disconnect the account from the banking screen. Select This Year (01/01/2021) for the "import as of" date. This will be a drop-down at the bottom left of the screen towards the end of the process. If your S Corp started last year, you may select Last Year (01/01/2020).
If you only have a handful of business transactions in personal accounts you don't have to connect the account. You can manually import the transactions in bulk with a CSV or manually enter each transaction directly in QBO.
Click here for instructions on the CSV method.
Click here for instructions on the manually enter method. These instructions are for manually entering expenses. For manually entering income, follow the same instructions but select "Bank Deposit" on the far right of the pop-up menu after you select the + New button in the top left of the screen.
You can wait for your training when we categorize business activity and exclude personal activity. Or you can start early and click here to check out the links at the bottom of the page.