Bookkeeping Basics for Your US LLC

Proper bookkeeping isn't just about compliance — it directly affects how painful (or painless) your annual tax filing is.

Why bookkeeping matters

When it's time to file Form 1120 or Form 1065, your CPA needs:

• •Total revenue by category
• •All deductible expenses, properly categorized
• •Capital contributions and distributions
• •Intercompany transactions (for Form 5472)
• •Beginning and ending balance sheet

If you don't have organized books, your CPA will charge you significantly more to reconstruct this information.

Basic setup

1. Separate bank account. Never mix personal and business funds. This is the #1 rule. Every dollar in and out of the LLC should flow through the business bank account.

2. Accounting method. Choose cash or accrual:

• •Cash basis: Record income when received, expenses when paid. Simpler.
• •Accrual basis: Record income when earned, expenses when incurred. Required for some businesses.

Most small LLCs use cash basis.

3. Chart of accounts. At minimum:

• •Revenue (broken down by category if you have multiple)
• •Cost of Goods Sold
• •Operating Expenses (rent, software, contractors, etc.)
• •Owner's Equity (capital contributions, distributions)
• •Bank accounts
• •Loans payable / receivable

Tools

Simple option: A spreadsheet tracking every transaction with date, description, amount, and category.

Better option: QuickBooks, Xero, or Wave. These connect to your bank account and semi-automate categorization.

Best option: A bookkeeper who handles it monthly. Costs $100-300/month for small businesses.

Monthly routine

• •Categorize all bank transactions

• •Reconcile bank statements

• •Record any transactions not flowing through the bank (credit card charges, intercompany payments)

• •Review for accuracy

For Form 5472 specifically

Keep a running log of all transactions between you (the foreign owner) and the LLC:

• •Date, amount, description, and direction (to LLC or from LLC)
• •This makes Form 5472 filing trivial at year-end

Tax-time deliverables

At year-end, your books should produce:

• •Profit & Loss statement
• •Balance Sheet
• •Transaction detail report
• •Intercompany transaction log

Hand these to your CPA and watch them smile.