This is not an end-all answer but it'll get you started
I have been through accounting courses in college as well as worked as a contractor (files as sole proprietor) for a few years but IANAA (I am not an accountant). Following @MasonWheeler's answer, if you're making that much money you should hire a bean counter to at least overlook your bookkeeping.
What type of business?
First, if you're the sole owner of the business you will most likely file as a sole proprietorship. If you don't have an official business entity, you should get it registered officially asap, and file under that name.
The problem with sole proprietorships is liability. If you get sued, not only are your business' assets vulnerable but they can go after your personal assets too (including house/cars/etc). Legally, you and your business are considered one and the same.
To avoid liability issues, you could setup a S corporation. Basically, the business is considered it's own entity and legal matters can only take as much as the business owns. You gain more protection but if you don't explicitly keep your business finances separate from your personal finances, you can get into a lot of trouble. Also, corporations generally pay out more in taxes. Technically, since the business is it's own entity you'll need to pay yourself a 'reasonable salary'. If you skip the salary and pay yourself the profits directly (ie evade being taxed on income/salary) the IRS will shut you down (that's one of the leading causes of corporations being shut down). You can also pay distribute bonuses on top of that but it would be wise to burn the words 'within reason' into your memory first. The tax man gets mad if you short him on payroll taxes.
S corporations are complicated, if you go that route definitely seek help from an accountant.
Bookkeeping
If you're not willing to pay a full time accountant you'll need to do a lot of studying about how this works.
Generally, even if you have a sole proprietorship it's best to have a separate bank account for all of your business transactions.
Every source/drain of money will fall into one of 3 categories...
Assets - What your business owns:
- Equipment
- Consumables
- Inventory
- Property
- Accounts Receivable (money others owe you)
- Cash
- Trademarks
- Patents
- etc...
Assets can be categorized by liquidity. Meaning how fast you can transform them directly into cash. Just because a company is worth a lot doesn't necessarily mean it has a lot of cash. Some assets depreciate (lose value over time) whereas some are very hard to transform back into cash based on the value and/or market fluctuations (like property).
Liabilities - What you owe others and what others owe you:
- Bank loans
- Credit cards
- Accounts Payable (money you owe others)
- Taxes Payable (taxes owed)
- etc...
Everything you owe and everything that is owed to you gets tracked. Just like credit cards, it's completely possible to owe more than you own as long as you can pay the interest to maintain the loans.
Equity - the net worth of the company:
- Initial investment (seed money)
- Revenue (any money your company earned)
- Expense (any money your company paid out)
- Retained Earnings (reserves)
- Distributions (money paid out to investors)
The approach they commonly teach in schools is called double-entry bookkeeping where they use the equation:
Assets = Liabilities - Equity
In practice I prefer the following because it makes more sense:
Assets - Liabilities = Equity
Basically, if you account for everything correctly both sides of the equation should match up.
If you choose to go the sole proprietorship route, it's smart to track everything I've mentioned above but you can choose to keep things simple by just looking at your Equity.
Equity, the heart of your business...
Basically, every transaction you make having to do with your business can be simplified down to debits (money/value) increasing and credits (money/value) decreasing.
For a very simple company you can assess this by looking at net profits. Which can be calculated with:
Net Profit = Revenue - Expenses
Revenues, are made up of money earned by services performed and goods sold. Expenses are made up of operating costs, materials, payroll, consumables, interest on liabilities, etc.
Basically, if you brought in 250K but it cost you 100K to make that happen, you've made 150K for the year in profit.
So, for your taxes you can count up all the money you've made (Revenues), subtract all of the money you've paid out (Expenses) and you'll know how much profit you've made. The profit is what you pay taxes on.
The kicker is, there are gray areas when it comes to deducting expenses. For instance, you can deduct the expense of using your car for business but you need to keep a log and can only expense the miles you traveled explicitly for business. Same goes for deducting dedicated workspaces in your house. Basically, do the research if you're not 100% sure about a deduction.
If you don't keep detailed books and try to expense stuff without proof, you can get in trouble if the IRS comes knocking. There are always mythical stories about 'that one guy' who wrote off his boat on his taxes but in reality, you can go to jail for tax fraud if you do that.
It comes down to this. At the end of the year, if your business took in a ton of money you'll owe a lot in taxes. The better you can justify your expenses, the more you can reduce that debt.
One last thing. You'll also have to pay your personal federal/state taxes (including self-employment tax). That means medicare/social security, etc.
If this is your first foray into self-employment you're probably not familiar with the fact that 1099 employers pick up 1/2 of the 15% medicare/social security bill. Typically, if you have an idea of what you make annually, you should be paying this out throughout the year. My pay as a contractor was always erratic so I usually paid it out once/twice a year. It's better to pay too much than too little because the gov't will give you back the money you overpaid.
At the end of the day, paying taxed sucks more if you're self-employed but it balances out because you can make a lot more money. If as you said, you've broken six figures, hire a damn accountant/adviser to help you out and start reading.
When people say, "a business degree will help you advance in any field," it's subjects like accounting are core requirements to become a business undergrad. If you don't have time for more school and don't want to pay somebody else to take care of it, there's plenty of written material to learn it on your own. It's not rocket surgery, just basic arithmetic and a lot of business jargon (ie almost as much as technology).
