What is the Difference Between a Business Accountant and Regular Accountant

It's 2020. You're sitting at home after watching hours of TV and scrolling through social media when you finally decide to dedicate more time to your hobby or passion project. After a few weeks of hard work and posting to your social media, you realize your hobby is something you can monetize. So, a few more weeks go by, you pick out a business name, set up an LLC, and start profiting off something you were only doing for fun not too long ago.

If this sounds familiar or if you've set up a business in recent years, you may have more questions than answers about running a business, including how to handle your taxes and business finances. Seemingly simple questions like what type of accountant you need for your business and the upcoming tax season may be at the top of your list. You may have used an accountant in the past for your personal taxes and are curious if you can use the same one for your business.

Don't worry—you're not alone if you're wondering what the difference is between a business accountant and a regular accountant. We'll break down the differences between both so you can make an informed decision regarding which makes the most sense for your situation.

Defining the Roles: Business Accountant vs. Regular Accountant

When it comes to running a business, the accounting side of things may seem daunting or overwhelming, especially when you're so focused on actually running your business. If you're drowning in work and need help with your financials, a business accountant can step in to help. Their primary job responsibilities include:

Tax Compliance: Ensuring your business is filing the necessary tax forms and informational reports.
Financial Reporting: Maintaining and reviewing your business's financial records and statements.
Financial Planning and Analysis: Reviewing your business's financial situation to provide guidance and insights for budgeting and evaluating performance.
Advisory: Providing advice when financial opportunities arise or for strategic planning.

Like individuals, businesses must comply with requirements like reporting income and expenses to the IRS and filing the appropriate tax forms. Business accountants assist with these compliance requirements and can act as advisors.

The responsibilities of a regular accountant, on the other hand, are similar but more focused on personal tax and financial matters and include:

Tax Compliance: Preparing and filing the required tax forms and schedules for individuals or assisting with tax audits.
Financial Planning: Providing guidance on tax-advantaged investment opportunities.
Advisory: Responding to personal tax questions like the tax implications of selling stock or buying a home.

Sometimes, the roles and responsibilities of both business and regular accountants overlap. While a regular accountant's expertise is in individual issues, many can assist with some business entities, depending on the size and complexity. If you are a freelancer or a self-employed individual, the accountant you use for your personal information likely can assist with your business needs, too.

Key Differences in Skills and Expertise

Since business accountants generally focus on providing services to entities or self-employed individuals, they inevitably have specialized knowledge of business financial topics and the skills needed to perform the services, including:

Business tax credits and deductions.
Entity tax elections and structure implications.
Employment, sales, or excise tax requirements.

Additionally, the goal of most businesses is to earn a profit, which requires not only smart business moves but also savvy financial management. Handling and evaluating business finances tends to be more complex than personal finances. It requires skills to identify areas for cost savings and advise on ways to plan for the future.

For example, a boutique owner may struggle to earn money if they aren't accounting for expenses or overspending on inventory that isn't selling. A competent business accountant can review the boutique's financial reports, assess key metrics, and advise on saving and spending opportunities.

Of course, individuals also want their money to grow, so regular accountants can also advise on financial management topics, including ways to invest money in tax-advantaged accounts or spending money to receive personal tax credits or deductions.

Both businesses and individuals must adhere to tax laws and file annual tax returns. Typically, business requirements are different and, in some cases, more complex than individuals. The last thing you want as a business owner is to spend your business profits on paying penalties to the government because you didn't know you had to file an informational tax form. A business accountant has the expertise to advise on any applicable forms so you can avoid the headache of the taxing authorities.

Services Offered by Business Accountants

Business accountants typically offer a range of services to meet different businesses' needs. Some companies may only need a business accountant for tax compliance services, while others may enlist their help for the entire suite of services.

Business accountants offer services to ensure your business adheres to compliance requirements and manages finances appropriately. Some examples of services include:

Managing Tax Obligations and Deductions: Preparing the required tax forms and informational reports like Schedule K-1, Form 1099, Form W-9, etc., and claiming tax-saving deductions for your business.
Bookkeeping: Recording and tracking income and expenses.
Preparing Financial Statements and Reports: Reviewing income and expenses to prepare the business income statement, balance sheet, and cash flow statement.
Financial Planning and Forecasting: Reviewing prior year data and business goals to project financials for the upcoming year.
Advisory Services: Providing guidance on tax-related questions about starting or growing a business, entity structure, tax planning opportunities, etc.

Services Provided by Regular Accountants

Regular accountants offer similar services to business ones but with more of a focus on individuals. The services they offer include:

Personal Tax Filing: Preparing and filing the individual's income tax returns, including Schedule C, which is where individuals report income and expenses from self-employment activities.
Tax Planning: Advising on ways to plan for next year, like with estimated tax payments, saving for the future, like offering guidance regarding tax-advantaged accounts, or tax-deductible spending opportunities like charitable contributions.
Assisting with Individual Budgeting and Saving Strategies: Some accountants may take on more of a financial advisor role and advise on ways to save for retirement or large purchases like buying a home.
Managing Family or Household Financial Records: For self-employed individuals with small operations, a regular accountant can help with the bookkeeping needed for the income tax return.

When to Hire a Business Accountant

There is no specific rule for when to enlist the services of a business accountant. Deciding to hire one depends on each business's unique situation and needs. Some guidelines for when it may make more sense to hire one include:

Business is Growing: Maybe you started a business a year ago, and you're now looking to hire employees, or you're thinking about opening more stores or taking on more clients. These are all signs that your business is growing, and it may be a good time to consider hiring a business accountant. Business growth is good but usually comes with more financial responsibilities and tax planning opportunities that a specialized accountant can advise on.
You Are At Capacity: Perhaps, as a business owner, you spend your entire day running your business and delivering quality customer service. When you close up for the day, the last thing you want to deal with is finances. If you find you are working long hours and the accounting is falling on the back burner, it may be a sign that you need the help of a business accountant to keep things on track.

When a Regular Accountant is Sufficient

Not all businesses need a business accountant to manage their books and tax compliance needs. For some, a regular accountant is sufficient for their current situation. Some examples of when a regular accountant is a good fit include:

Handling Simple Tax Returns and Personal Finances: If your situation is straightforward, with a Form W-2 from your employer and some investments in stocks or other companies, you may only require the services of a regular accountant.
Sole Proprietors and Freelancers: Maybe you have a side hustle after your full-time job, or you are the only person working and running your business, a regular accountant can most likely handle all of your business and personal accounting needs. They usually offer bookkeeping services to manage your income and expenses (or you can do this part on your own). They can prepare your individual tax return, which is where the income from your business or self-employment activity is reported.

Final Thoughts

Starting your own business and working for yourself is an exciting time, but it also comes with the responsibility of making important business decisions. Whether it's your first time running your own business or you're a seasoned entrepreneur, you may struggle with deciding if and when your company needs a business accountant. Business owners should reflect on their situation and decide based on their needs if the services of an accountant are necessary. For some businesses, a regular accountant is all they need, while others can benefit from the expertise of a business accountant.

Whether you need help with tax planning, bookkeeping, or business financials, a trusted professional can provide the guidance you need. Click here to connect with a qualified accountant and take the first step toward financial clarity today.