My Collective Accounting S-Corp Adventure

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Bookkeeping sucks. Accounting sucks. Tax planning sucks. Paying taxes sucks.

And if you’re still crunching your numbers in your solo consulting or freelance business while working to serve your clients, you’re likely overwhelmed and paying more taxes than you should.

Or at least that is my experience running a single-person LLC for over a decade.

While I was doing an okay job managing my day-to-day cash flow, I was never sure how to pay myself in a way that helped me owe less in taxes.

Collective Helps Business Owners

As a result, I worried that I wasn’t saving enough money to pay Uncle Sam.

Then when tax time came, I spent hours hacking through a popular online tax prep service. Then I would get stuck with a question and need to pay extra money to speak with an accountant for five minutes on the phone.

The thing is. I knew that hiring a year-long bookkeeper would help make much of my worry and frustration disappear. But I didn’t know where to start.

That’s what led me to Collective Accounting.

About Collective

When I discovered Collective, I knew they could solve some of my accounting problems.

The service is a one-stop shop that helps solo entrepreneurs with business formation, tax planning, accounting, and bookkeeping.

I scheduled a call with one of their representatives. And they provided a good overview of the services.

One of the most interesting things they do is help you re-structure the legal entity of your business so that you are taxed as an S Corporation (S Corp).

You may wonder why this is important.

Well, the structure of your business can significantly impact how your business is taxed.

And having the correct business entity can also protect your personal assets from your business assets, which is an added safety net in case of any business disputes.

Importance of S Corporation

An S Corp allows you to legally become an employee of your own company, which can result in substantial tax savings.

When I crunched the numbers, I realized that changing from a single-person LLC to a single-person LLC taxed as an S Corp would save me more than ten thousand dollars annually!

While there are a few reasons for this, one tax advantage to becoming an S Corp is having the ability to become an employee of your company, run payroll and pay yourself a consistent salary, complete with employee tax withholding.

This means that any money the business pays you is now an expense to the business.

And because you are now a W-2 employee of your own business, you are eligible for many taxed-advantaged perks, including a Solo-401K.

The Solo-401K is not a service offered by Collective. But they do provide set-up instructions.

I’d much rather reinvest the money in my business than lose it to taxes.

While the service is not perfect (I’ll talk about this later), the staff set me up as an S-Corp and structured my business in a way that allowed me to pay myself consistently.

And aside from the tax advantages, having a consistent income helps me manage cash flow and prevent sleepless nights.

Collective Bookkeeping Service
Collective Bookkeeping Service

Getting Started with Collective

Starting off with Collective is simple.

You can apply to the Collective by going directly to the site.

Once you sign up and your application is approved, you will have access to their software and team to assist you from calculating potential tax savings to accessing your online portal.

When approved, you’ll be assigned a Member Relationship Manager who will help guide you through a process that looks like this:

  • Step 01: Find Tax Savings: Answer questions to discover potential S Corp tax savings.
  • Step 02: Meet Advisor: Chat with a Collective advisor to explore your situation.
  • Step 03: Establish S Corp: Use the Collective step-by-step wizard to set up S Corp.
  • Step 04: Meet Team: Meet with your accounting, tax, and Relationship Manager.
  • Step 05: Manage Accounting: Collective manages your books and provides reports.
  • Step 06: Get Advice: Your Relationship Manager can chat when needed.

If any of this seems overwhelming, don’t worry.

The team is great at helping you navigate the paperwork and regulations to set up everything.

Then once set up, Collective will focus on your numbers while you can focus on your business, which will save opportunity costs in addition to the tax savings.

Collective’s Pricing Model

Collective’s pricing is as straightforward and transparent as its services.

There are no complex pricing structures or hidden fees to worry about.

They offer cost-effective, comprehensive packages that cover everything you need.

You can choose a monthly plan or save with a yearly subscription.

The plan covers everything from business formation to ongoing compliance, bookkeeping, and accounting services.

What’s great about the service is knowing exactly what you’re getting and what it will cost you.

Once your Collective onboarding is completed, your books will be set up. The S Corp will be official. Payroll will be automated. And your numbers will be reconciled.

You’ll even get links to monthly reports directly in your email inbox.

Collective Accounting Experience

No business is perfect. And I mentioned earlier that the Collective is not perfect.

While most of my experience has been good, there are two downsides to working with Collective.

  • Downside 01: Limited Cash Flow Analytics:

When it comes to monthly bookkeeping, I wish Collective provided ways more granular cash flow analysis and provide personalized answers to questions like these:

  • What’s my cost for customer acquisition?
  • What is my customer’s lifetime value?
  • Is my return on ad spend within KPI or not?

To be fair, I never expected this to be part of their service.

But I really wish it was, as it would make the service even more valuable.

  • Downside 02: Semi-Warm Business Relationship:

When you join Collective, you’ll be assigned a “relationship manager.” This is a good opportunity to figure out if you both vibe and really get an understanding of expectations.

Since the company works with so many people, don’t expect your relationship manager to know more about you or your business than what is generally necessary to maintain scale.

That said, communication with the team is responsive. I usually get a response within a day or two, if not sooner.

This was especially my experience during the busy tax season.

Collective quickly responded to every one of my tax-related questions. They were able to complete both my business and personal tax returns and get them filed on time.

And true to the promise, they saved me so much in taxes that I actually got a refund.

Final Thoughts On Collective

Overall, Collective is a good service if you’re self-employed and hate taxes.

In addition to saving you money on your taxes, they also handle all the annoying paperwork, calculations, and filings. And they ensure you stay compliant with all the tax regulations and filing deadlines.

So you don’t have to think about it.

The setup process is streamlined and easy. They handle everything – from forming an S Corporation to syncing your accounts with payroll and accounting software.

Collective has been a game-changer for my business. And if my story resonates with you, learn more and apply to join the collective here.