Ten Terms Every Brand-New Entrepreneur Should Know

You don’t need an accounting degree to run a business — but ten terms come up constantly, and knowing them precisely prevents expensive confusion.

• 1. EIN — your business’s federal ID number; free from the IRS, required for bank accounts and hiring.
• 2. Entity / pass-through — the legal form of your business, and whether its profits “pass through” to your personal return (LLCs, S corps) or are taxed at the company (C corps). See our start-up guide.
• 3. Cash vs. accrual accounting — recording income when money moves versus when it’s earned; small businesses usually start on cash.
• 4. Gross vs. net — revenue before costs versus profit after; conflating them flatters every bad decision.
• 5. Reconciliation — matching your books to bank statements monthly; the habit that makes numbers trustworthy.
• 6. Estimated taxes — the quarterly prepayments self-employed owners make in place of withholding.
• 7. Deduction — an ordinary and necessary business expense that reduces taxable profit, if documented per IRS recordkeeping rules.
• 8. Payroll taxes — what employers withhold and pay on wages, on strict deposit schedules.
• 9. 1099 vs. W-2 — contractor versus employee; the classification carries real legal weight.
• 10. Chart of accounts — the category system your books are organized by; set it up right once and everything downstream is cleaner.

Frequently Asked Questions

Which of these matters most on day one?

EIN, entity, and separating business from personal money — everything else builds on those.

Cash or accrual — which should I pick?

Most small businesses start with cash accounting for simplicity; certain sizes and inventory situations require accrual. Ask before you assume.

How do I avoid the 1099/W-2 mistake?

Don’t classify by preference — classify by the working relationship. When in doubt, get a professional read before the first payment.

Do I really need to prepay taxes quarterly?

If you’ll owe meaningful tax and nothing is withheld — yes, or penalties accrue. Clean books make the calculation trivial.

Where do I learn the rest?

Free resources like SCORE cover fundamentals; for your specific numbers, contact us — teaching clients is half our job.

Fluent enough to be dangerous? Good. For everything past the glossary: Contact us or call (215) 914-6929.