As a business owner, you do need to get a business license from your local city, and you will need to check with your state to see if any additional license is required. In a couple states, you must be licensed do prepare taxes professionally (California is one of them).

Costs of licenses vary. Most city business licenses are rather inexpensive, but you really much check with your local government, because some can be as much as $300 (as it is here in Philadelphia).

If you need someone to do your taxes, you are in the same boat as most everyone else. You need to find a CPA, Enrolled Agent or professional tax preparer. But the good news for you if you are opening a bookkeeping service, is your tax preparer can become a referral source for your business.

~Gabrielle

I completely agree with Sylvia about the three most common mistakes new bookkeepers make. I would only elaborate on #1…

I think the reason new bookkeepers undercharge for their work is that they UNDERVALUE their own services. Since they are new, they feel insecure, so they charge less than what they are really worth because they lack the confidence to charge more.

I would encourage all new freelance bookkeepers to charge AT LEAST the market rate, if not more. I’ve found that a low rate = low caliber clients, while higher rates bring higher caliber clients. Higher caliber clients bring a lot of intangible benefits - they complain less, are more grateful, pay according to the terms, and do what you ask. They are just better all the way around.

Excellent post. Thanks.

Finding support and encouragement is a BIG reason I started this blog; it’s BECAUSE so many tend to be guarded that it is needed. I think it is self-defeating to isolate ourselves and “guard” our businesses too closely because the need for bookkeepers is HUGE! It’s the difference between a scarcity mindset and one of abundance.

From where I sit, it sure seems that we will serve ourselves and the small business community much more productively if we can use the synergy that comes from respectful and cooperative sharing. There’s plenty of work to go around (more than enough, actully), and we all bring different skills and specialties to the table. When you mix that with high integrity, we can’t lose!

We are stronger and more prosperous by working together!

That’s my soapbox and I’m determined to stand tall on it!

~Gabrielle

Interesting question for this article?!

But a good question on its own.

The answer is, some do and some don’t.

Bookkeeping and taxes are not the same thing.

You need bookkeeping records (specifically a Profit & Loss Statement, and possibly a Balance Sheet, depending on the business entity type) in order to prepare the tax return. But bookkeepers do not automatically know how to prepare a tax return just because they understand bookkeeping.

The opposite is also true. Tax preparers do not automatically know bookkeeping just because they understand taxes.

Therefore, some bookkeepers choose to learn tax preparation so they can do it for themselves, but also so they can add it as another service offering to their clients. Others would rather not go the tax prep route, and instead have their own accountant or tax preparer do their taxes for them.

The advantage to learning taxes is, as stated, you can do it for yourself AND turn it into a profit center for your business.

The down side is, if you prepare taxes professionally, you may be seen as a threat when working to build referral relationships with CPAs. They may not want to work with you for fear that you will attempt to steal their tax clients away. For many CPAs tax work is their bread and butter.

Conversely, the advantage if you choose not to offer tax services is that you will find it much easier to build mutual referral relationships with CPAs and professional tax preparers.

So bottom line, it’s really up to you as to whether or not you wish to do taxes (for yourself and others) or not.

Gabrielle