Daperis CPAAccounting & Bookkeeping for Tradespeople and Contractors
A trades business runs on job costing, vehicles, and seasonal cash swings in a way most generic small business advice never quite accounts for. If you're an electrician, plumber, contractor, or run any kind of skilled trade business, the numbers that actually matter to you aren't the same ones a consultant or a retail shop is watching.
Entity Setup for a Solo Trades Business
Most solo tradespeople start as a sole proprietorship by default, simply because they never filed anything else, which means zero separation between personal and business liability. Given how physical trades work, on-site risk, equipment, vehicles, an LLC is worth serious consideration earlier here than in a lower-risk service business. Once profit is consistently strong, an S-Corp election on top of that LLC can meaningfully cut your self-employment tax, though it adds real payroll and filing obligations that need to actually make sense against your numbers, not just sound appealing at a barbecue.
Vehicle and Equipment Write-Offs
Your truck, tools, and equipment are some of the biggest deductions available to a trades business, and also some of the most commonly mishandled. For a vehicle, you pick one method, standard mileage rate or actual costs, and either way, the deduction lives or dies on a mileage log kept as you drive, not reconstructed later from memory or gas receipts. Equipment and larger tools can often be written off immediately in the year they're placed in service rather than depreciated slowly, but the asset has to actually be in use by year-end to count, not just purchased or sitting on order. See the Vehicle Write-Off Rules article for what actually qualifies and what records the IRS expects to see.
Paying Yourself From an LLC
Running your trade through an LLC? How you actually pay yourself, an owner's draw versus payroll through an S-Corp election, changes based on how your entity is taxed, and this is a common source of confusion for tradespeople moving from working for someone else to running their own crew. See the How to Pay Yourself From an LLC article for the mechanics of each method.
Job Costing: Knowing What Each Job Actually Made
This is the number most trades businesses never track properly, and it's the one that matters most. Job costing means tracking labor, materials, and overhead against each individual job, not just glancing at total revenue for the month. Without it, a business can be genuinely busy and still not know whether last month's biggest job actually made money once materials ran over and a crew member's overtime ate the margin. This is the single biggest gap between a trades business that's profitable on paper and one that's actually profitable job by job. The true value of this data depends entirely on consistency. You need to ensure every bill, expense, and hour of labor is tagged to the correct project at the moment it happens, rather than after the fact.
Managing Seasonal Cash Flow
Trades work is often genuinely seasonal, exterior work slows in winter, certain interior or commercial work picks up, revenue swings that a retail or service business doesn't experience the same way. Managing this means building a cash reserve during strong months specifically to cover the slower ones, and looking at your numbers on a rolling basis rather than assuming a good August guarantees a good November. A business that spends every strong month's cash as it comes in has no buffer when the seasonal slowdown hits, and that's exactly when payroll and quarterly tax payments stop being routine and start being genuinely stressful.
Tracking Materials and Reimbursable Costs
For contractors billing clients for materials, keeping a clean, real-time record of what was purchased for which job matters for two reasons: it's what makes accurate client invoicing possible, and it's what protects your deduction if the IRS ever asks for it. A shoebox of receipts sorted at tax time works, technically, but it costs you accuracy on both fronts along the way, and you end up reconstructing a year from memory.
Keep It Simple / Key Takeaway 🍕
The numbers that actually run a trades business, job-by-job profitability, vehicle and equipment tracking, a cash cushion built for the slow season, rarely show up in generic small business advice. Track them specifically, and the annual tax return stops being the first place you find out how the year actually went.
Disclaimer: This article is for educational and informational purposes only and is not intended as financial, investment, legal, or tax advice. The author assumes no liability whatsoever in connection with its use. This content is not an exhaustive explanation of any topic, practice or process. You should always seek the advice of a licensed professional before making any accounting, tax, financial, investment or legal decision.