Short answer
A chart of accounts is an LLC's organized list of every financial account, sorted into five categories: assets, liabilities, equity, income, and expenses. Each account carries a number that signals its category, and the structure feeds the LLC's balance sheet and income statement.
Key takeaways
- A chart of accounts groups every account into five categories: assets, liabilities, equity, income, and expenses. A numbering convention gives each category its own block, so account 1000 is an asset and 5000 is typically an expense.
- An LLC's equity section differs from a corporation's. Instead of common stock and retained earnings, an LLC tracks member capital contributions, member draws, and member equity, with one set of accounts per member in a multi-member LLC.
- The default chart in QuickBooks, Xero, or Wave is a starting point, not a finished chart. Most LLCs trim unused accounts and customize the income and expense accounts to match how the business actually earns and spends.
- The principal business address entered during accounting setup prints on the financial statements, the 1099-NEC forms, and the W-9. A consistent address across the chart, the EIN, and the bank keeps the year-end forms matching the IRS record.
Before you start
- Confirm the LLC's accounting method, cash or accrual, since the method decides whether the chart needs accounts receivable and accounts payable.
- Confirm whether the LLC is single-member or multi-member, since the equity section carries one set of capital and draw accounts per member.
- Have the EIN (Employer Identification Number) confirmation and the state filing address on hand, since the same address should flow into the accounting setup.
Who this is for
- New LLC owners setting up bookkeeping in QuickBooks, Xero, or Wave for the first time.
- Founders who accepted a default chart of accounts and want to know which accounts to add, rename, or remove.
- LLC owners preparing books for a CPA (Certified Public Accountant) who want the equity and expense structure right before year-end.
A chart of accounts is an LLC's (Limited Liability Company's) organized list of every account its books use, sorted into five categories: assets, liabilities, equity, income, and expenses. Each account carries a number that signals its category, and the structure feeds the LLC's balance sheet and income statement.
The five categories are the same for a corner-store LLC and a software LLC. What changes is the individual accounts inside each category and, for an LLC specifically, how the equity section is built. The sections below walk through the structure, the numbering blocks, a starter template with account numbers, the equity accounts that make an LLC different from a corporation, and the place where the LLC's business address enters the picture.
The five account categories every LLC chart uses
Every chart of accounts organizes accounts into the same five top-level categories. The first three, assets, liabilities, and equity, appear on the balance sheet and describe what the LLC owns, what it owes, and what is left for the owners. The last two, income and expenses, appear on the income statement and describe what the LLC earned and spent over a period.
| Category | What it holds | Typical number block | Example accounts |
|---|---|---|---|
| Assets | What the LLC owns | 1000-1999 | Business checking, accounts receivable, equipment |
| Liabilities | What the LLC owes | 2000-2999 | Credit card payable, sales tax payable, loans |
| Equity | The owners' stake | 3000-3999 | Member capital, member draws, retained earnings |
| Income | What the LLC earns | 4000-4999 | Service revenue, product sales, shipping income |
| Expenses | What the LLC spends | 5000-8999 | Contract labor, software, professional fees, rent |
The five standard categories and the common numbering blocks. Numbering conventions vary by platform; the ranges here follow the widely used four-digit pattern.
The leading digit is the category signal
In the four-digit convention, the first digit tells you the category at a glance: 1 for assets, 2 for liabilities, 3 for equity, 4 for income, and 5 and up for expenses. This is why a bookkeeper can read an account number and know where it belongs without looking it up.
The numbering system: blocks with gaps, not a straight list
Accounts are numbered in blocks with gaps between them, not in a continuous 1, 2, 3 sequence. The gaps leave room to insert new accounts later without renumbering the whole chart. A business that starts with a single software expense account at 6100 can add software for accounting at 6110 and software for marketing at 6120 later, keeping related accounts grouped together.
- 1000-1999 assets. Current assets like the business checking account and accounts receivable take the lower numbers; fixed assets like equipment take the higher numbers.
- 2000-2999 liabilities. Current liabilities like a credit card balance and sales tax payable come first; longer-term loans come later in the block.
- 3000-3999 equity. Member capital, member draws, and member equity. This block is where the LLC structure shows up most clearly.
- 4000-4999 income. The main revenue accounts, split by how the LLC earns when that split is useful for decisions.
- 5000-8999 expenses. The largest block, because most LLCs track more expense categories than anything else. Cost of goods sold (COGS) often takes its own sub-block starting at 5000, with operating expenses starting at 6000.
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How an LLC's equity accounts differ from a corporation's
The equity section is where an LLC chart of accounts departs from a corporation's. A corporation's equity holds common stock, additional paid-in capital, and retained earnings. An LLC has no stock. Instead, the equity section tracks each member's stake through capital contribution accounts, draw accounts, and a member equity account. A single-member LLC keeps one set; a multi-member LLC keeps one set per member, so the books show each owner's contributions and withdrawals separately.
- Member capital contribution. Records money or property a member puts into the LLC. This is not income and does not appear on the income statement; it increases the member's equity.
- Member draw. Records money a member takes out of the LLC for personal use. A draw is not a payroll expense and is not a deduction; it reduces the member's equity. Owner pay in a default LLC runs through draws, not through a salary account.
- Member equity, also called owner's equity. The running balance of a member's stake: contributions plus the member's share of profit, minus draws.
- Retained earnings. Profit the LLC has kept rather than distributed. Some LLC charts fold this into member equity; others track it separately, which matters more after an S-corporation election changes how owner pay works.
An S-corp election reshapes the equity section
When an LLC elects S-corporation tax treatment, owner pay splits into a reasonable salary that runs through payroll and distributions that run through equity. The chart of accounts then needs a payroll wages account and a distributions account that a default LLC does not use. The S-corporation election guide covers the threshold where this switch tends to make sense.
A starter chart of accounts for a single-member LLC
The table below is a starter chart for a single-member service LLC with no inventory. It is intentionally short. A real chart grows as the business adds expense categories it wants to track. Use it as a base, then rename and add accounts to match how the LLC actually earns and spends.
| Number | Account | Category |
|---|---|---|
| 1000 | Business checking | Asset |
| 1010 | Business savings | Asset |
| 1200 | Accounts receivable | Asset |
| 1500 | Equipment | Asset |
| 2000 | Credit card payable | Liability |
| 2200 | Sales tax payable | Liability |
| 3000 | Member capital contribution | Equity |
| 3100 | Member draw | Equity |
| 3900 | Member equity | Equity |
| 4000 | Service revenue | Income |
| 4100 | Product sales | Income |
| 5000 | Cost of goods sold | Expense |
| 6000 | Contract labor | Expense |
| 6100 | Software and subscriptions | Expense |
| 6200 | Professional fees, legal and accounting | Expense |
| 6300 | Business address and mail service | Expense |
| 6400 | Marketing and advertising | Expense |
| 6500 | Bank and merchant fees | Expense |
A starter chart for a single-member service LLC. Add, rename, or renumber accounts to match the business.
Cash versus accrual: how the method shapes the chart
The accounting method decides which accounts the chart actually needs. A cash-method LLC recognizes income when money arrives and expenses when money leaves, so it can often skip accounts receivable and accounts payable. An accrual-method LLC recognizes income when earned and expenses when incurred, so it needs accounts receivable, accounts payable, and sometimes deferred revenue. Most single-member LLCs without inventory use cash; LLCs with inventory or significant credit billing may need accrual under IRS rules. The first-year bookkeeping setup guide covers how to pick the method and the platform that runs the chart.
Where the business address enters the chart of accounts
The chart of accounts sits inside the bookkeeping software, and that software asks for the LLC's principal business address during setup. The address does not become an account, but it prints on the financial statements the chart produces and flows into the tax forms the LLC files. The 1099-NEC forms the LLC issues to contractors, the W-9 the LLC gives to clients, and the year-end statements a CPA reviews all carry that address.
The 1099-NEC and W-9 match to the IRS on the recipient's name and taxpayer identification number, not on the address, so a wrong address does not by itself trigger a matching notice. The address still matters for a different reason: the IRS mails notices, letters, and correspondence to the address on record, so an outdated address on the EIN record can mean missed IRS mail. When the business address changes, the LLC updates the IRS record with Form 8822-B. Keeping one real US business address across the state filing, the EIN, the bank, and the bookkeeping setup keeps the records consistent and the mail reaching the LLC. Before entering an address in the accounting software, founders can run it through the free address checker to confirm it is a deliverable commercial address rather than a residential or PO Box address.
Setting up the chart in QuickBooks, Xero, and Wave
Most cloud accounting platforms ship with a default chart of accounts based on the business type selected during signup. The default is a reasonable starting point, but it is generic. The setup work is trimming accounts the LLC will never use and adding the income and expense accounts that match the business.
- QuickBooks Online. Generates a default chart from the industry chosen at signup. Accounts are edited under the chart of accounts settings, where the LLC can add the member draw and member capital accounts the default may not include. QuickBooks uses account detail types that map to tax lines, so choosing the right detail type matters at year end.
- Xero. Ships a default chart that maps to tax reporting and lets the LLC import a custom chart from a spreadsheet. The flat pricing and spreadsheet import make Xero common among founders who want to load a prepared chart rather than build it account by account.
- Wave. A free platform with a simpler default chart, suited to low-volume single-member LLCs. The account list is editable but offers fewer reporting features than QuickBooks or Xero as the business grows.
Whichever platform runs the chart, the equity accounts usually need attention. Default charts are built for a generic small business and often lack the member draw and member capital accounts an LLC uses for owner pay, so those are typically the first accounts to add.
Common chart of accounts mistakes for new LLCs
- Dumping everything into one expense account. A single business expense account defeats the purpose of the chart. The category detail is what produces the tax deductions and the visibility into where money goes.
- Running owner pay through an expense account. In a default LLC, owner pay is a member draw in the equity section, not a payroll or wages expense. Miscategorizing draws as expenses overstates costs and understates the owner's equity.
- Creating a new account for every vendor. Accounts are categories, not a list of who the LLC paid. Vendors belong in the vendor list; the chart stays lean with broad expense categories.
- Numbering with no gaps. A continuous 1, 2, 3 numbering leaves no room to insert related accounts later without renumbering. Leave gaps between accounts from the start.
- Using an inconsistent address across records. A residential or PO Box address on the accounting setup that differs from the EIN record carries into every 1099 and W-9 the LLC issues.
Checklist: building your LLC chart of accounts
- 1Confirm the accounting method, cash or accrual, since it decides whether the chart needs accounts receivable and payable.
- 2Start from the platform's default chart, then remove accounts the LLC will not use.
- 3Set up the five categories with a numbering block for each: 1000 assets, 2000 liabilities, 3000 equity, 4000 income, and 5000 and up for expenses.
- 4Add the LLC equity accounts: member capital contribution, member draw, and member equity, one set per member.
- 5Add income accounts that match how the LLC earns, and expense accounts that match how it spends.
- 6Leave gaps between account numbers so related accounts can be inserted later.
- 7Enter a consistent business address in the accounting setup, matching the EIN and the bank, and confirm it is deliverable before saving.
Setting up the address behind the chart
The chart of accounts is where an LLC's financial detail lives, and the business address behind it is what keeps the year-end forms consistent. save office provides a real US business address in seven cities, accepted for LLC filings, EIN records, banking, and the accounting setup that runs the chart. The same address flows into the state filing, the bank application, the bookkeeping software, and the 1099s and W-9s the LLC issues, so every record matches. Compare the plans and pricing, or run an address through the address checker before entering it in the books.
Frequently Asked Questions
