Your LLC should keep clear, accurate records of all income, expenses, bank transactions, payroll, and tax filings to comply with IRS rules and support any deductions or credits you claim.
Keeping organized financial records is more than good business hygiene-it’s a legal necessity. The IRS expects every business, including LLCs, to maintain detailed documentation to verify reported income and deductions. Good records not only make tax season easier but also protect you in the event of an audit and help your business make informed financial decisions.
Contents
1. Income Records
Your LLC must maintain a clear record of all income received. This includes payments from customers, clients, or any other revenue source.
Examples of income records:
- Invoices and receipts
- Bank deposit slips
- 1099 forms received from clients (if applicable)
- Point-of-sale (POS) or eCommerce transaction reports
Make sure these records are consistent with your bank statements. Any gap between recorded income and deposits could raise questions with the IRS.
2. Expense Records
To deduct a business expense, you need documentation showing what you bought, how much you paid, and why it was business-related.
Examples of deductible expense records:
- Receipts for supplies, equipment, and software
- Vendor invoices
- Proof of payment (credit card statements, canceled checks)
- Mileage logs for business travel
- Meal and entertainment logs (including who you met with and why)
Always keep the original receipts or digital copies. Scanned documents or photos are acceptable as long as they’re legible and complete.
3. Bank and Credit Card Statements
Every LLC should have a dedicated business bank account and credit card. These statements serve as the backbone of your bookkeeping and help reconcile income and expenses.
Keep records of:
- Monthly checking and savings account statements
- Business credit card statements
- Canceled checks and electronic transfer confirmations
Review these regularly to spot errors, fraud, or discrepancies between your books and financial reality.
4. Payroll Records (If Applicable)
If your LLC has employees-or if you’re an owner-employee of an S Corporation-you must maintain proper payroll records. The IRS requires businesses to retain payroll data for at least four years.
Key payroll records include:
- Employee names, addresses, and Social Security numbers
- Wages, bonuses, and withheld taxes
- Forms W-2, W-3, 941, and 940
- Timecards or pay records
You may also need to comply with state-specific employment recordkeeping laws.
5. Tax Forms and Filings
Keep copies of all federal and state tax returns, supporting schedules, and any correspondence with the IRS or state tax agencies. This includes:
- Form 1040 with Schedule C (single-member LLCs)
- Form 1065 and Schedule K-1s (multi-member LLCs)
- Form 1120-S (if taxed as an S Corp)
- Form 1099s issued to contractors
- Confirmation of estimated tax payments (Form 1040-ES)
Keep these documents for a minimum of three years-longer if you underreported income or need to carry forward deductions.
6. Legal and Organizational Documents
Even though they’re not directly tied to taxes, your LLC should keep a secure copy of all legal and operational records. These can support your tax status or prove business legitimacy if challenged.
- Articles of organization
- Operating agreement
- EIN confirmation letter from the IRS
- S Corp election (Form 2553), if applicable
- Business licenses and permits
7. Digital Tools Can Help
Use accounting software like QuickBooks, Xero, or Wave to automate and organize your recordkeeping. Many platforms allow you to link your bank accounts, upload receipts, and generate reports-all of which streamline tax filing.
Cloud storage or document management apps like Google Drive or Dropbox can also help you archive scanned receipts, tax forms, and financial statements securely.
Proper recordkeeping isn’t just a good habit-it’s a foundation of business compliance. Your LLC should maintain clear, accurate, and accessible documentation of all income, expenses, bank activity, payroll, and tax filings. These records protect you during audits, maximize deductions, and make tax filing smoother. Whether you handle your own books or hire an accountant, strong records are non-negotiable for a healthy business.
