Building a chart of accounts for a US LLC
The chart of accounts is the backbone of a business's bookkeeping — the organised list of buckets that every transaction is sorted into. Get it right and reports assemble themselves; get it wrong and you spend every month untangling a pile of miscoded entries. For a new US LLC, setting up a sensible chart of accounts early is one of the highest-return bookkeeping decisions there is. This guide explains its structure and how to build one that fits.
The five account types
Every chart of accounts is organised around the same five categories, which are also the components of the two core financial statements:
- Assets — what the business owns: bank accounts, receivables, equipment, inventory.
- Liabilities — what it owes: payables, credit cards, loans, taxes due.
- Equity — the owners' stake: contributions, draws, retained earnings.
- Income — what it earns from its trade.
- Expenses — the costs of running it.
Assets, liabilities, and equity make up the balance sheet; income and expenses make up the profit and loss. Because every account belongs to exactly one of these types, sorting a transaction into the right account is what ultimately produces correct reports.
Numbering and order
Accounts are usually numbered so they sort in a consistent order, conventionally by type — assets first, then liabilities, equity, income, and expenses — often in blocks (for example, one range for assets, another for income). The numbering is not cosmetic: it groups related accounts together on every report and leaves room to insert new accounts without renumbering everything. A tidy numbering scheme set up at the start saves a great deal of reorganising later, which is why it is worth a few minutes of thought before the first transaction is entered.
Right-sizing it
The most common mistake is building too many accounts too soon, in the hope of detail, and ending up with a list nobody can code against consistently. The opposite mistake — a handful of vague accounts where everything becomes "general expenses" — hides exactly the information the business needs. The balance is to build the chart around the questions you want the numbers to answer: if you want to watch software spend, give it an account; if you never look at postage separately, do not. Start lean and split an account only when the category grows big enough to be worth watching on its own.
Chartered Advisory sets up a clean, right-sized chart of accounts for US LLCs and keeps the books running month to month.
Avail our bookkeeping servicesKeep it separate from personal money
Whatever the structure, the LLC's chart of accounts should record the business's money only, kept apart from the owner's personal finances. This matters even for a single-member LLC that is disregarded for tax: mixing personal and business transactions muddies the reports, weakens the liability separation the LLC is meant to provide, and makes the year-end tax numbers unreliable. Owner money moving in and out is recorded through dedicated equity accounts — a subject in its own right, covered in owner contributions, draws and distributions. Set the chart up cleanly and separately from day one, and the monthly close becomes routine rather than a reconstruction exercise.
Sources
This guide is written against the official and clearly labelled professional references below. Rates, thresholds and portal procedures change between reviews, so open the primary source before relying on a figure.
Questions people also ask
What is a chart of accounts?
It is the organised list of every account the business uses to record its money — the categories into which each transaction is sorted. It groups into assets, liabilities, equity, income, and expenses, and every entry in the books lands in one of these accounts. A well-built chart of accounts is what makes reports such as the profit and loss and balance sheet come out cleanly.
How detailed should a chart of accounts be?
Detailed enough to answer the questions you actually ask of the business, and no more. Too few accounts and everything piles into "miscellaneous"; too many and coding becomes a guessing game. A practical approach is to start lean, matched to how you want to see the numbers, and split an account only when a category grows large enough to be worth watching on its own.
Does a single-member LLC need its own chart of accounts?
Yes — even though a single-member LLC is a disregarded entity for tax, it should keep its own books with its own chart of accounts, separate from the owner's personal finances. That separation is what supports the liability protection of the LLC and makes the year-end tax figures reliable. The tax treatment does not remove the need for clean, separate bookkeeping.
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