If you tell people “I work at a start-up,” images of open-working spaces with ping pong tables and casual working atmospheres probably pop into their heads. In reality, start-up companies face many obstacles, and the founders and officers have many tax, operational, and legal logistics to handle. No single person is fully knowledgeable in every field, so how do you ensure that you properly handle all of the details of developing your company?
The key is to assemble a team of experts who are well-versed in the areas that are essential to your business’ success. One of the most important players is a good accountant: they can provide information on how to structure and register your business, as well as important financial and tax considerations. Freyman CPA assists start-ups at every step: from determining what entity structure most appropriately meets your needs and long-term goals, to offering tailored solutions once your business is up and running.
Starting a business often requires a significant amount of capital. Many entrepreneurs may not have enough cash on hand to cover the cash outflows during the first few years of operations, when revenues may be limited. Freyman CPA can assist in the preparation of financial statements for internal purposes, or can audit financial statements that may be required by potential investors. If you have not yet legally organized your business, a consultation with us can help ensure that you start out on the right foot. Will your business always be closely-held, perhaps only by family members? Or do you expect to engage in external capital raising? By working together, we can determine the most advantageous structure.
Every start-up encounters the substantial amount of paperwork required to comply with federal, state, and local rules and regulations. The specific requirements depend upon a number of factors, including whether you have employees (even remote employees), how many physical locations you have, and how you are organized. Navigating the red tape can be difficult, especially when your expertise is in running a business, rather than in legal and tax compliance. We have worked with numerous start-ups and are familiar with what tasks need to be completed in order to ensure your company’s compliance. This allows you to focus on your business’ success while we ensure that you are in full compliance.
In order for your business to succeed in the long-run, you need to ensure that you are profitable. While this is an obvious statement, many start-up founders find that they become so caught up in furthering the business, that they forget to actually review the financials. We can help your company manage budgets by creating strategic plans that can then be assessed against actual results. Freyman CPA can improve your cash flow management through budgeting, planning, and forecasting. You can overlook your finances in the short-term, but for the long-term viability of your company, it is essential that you regularly review your start-up’s financial data.
The best time to develop tax-saving strategies is before any action is taken. If you consult with us, we can provide guidance on various matters, including how to structure transactions, take on debt, hire employees, and set up benefit plans so that they are most beneficial from a tax perspective. Many start-ups are unaware of the tax planning opportunities that exist until it is too late.
“Should I pay myself?”
Short answer: Yes! Long answer: Yes, but it depends on a number of factors, including whether you have employees, how the entity is structured, and whether you have outside investors. You may feel that you do not have enough cash to pay yourself, but we can provide creative solutions to ensure that you are compensated without putting yourself out of business. It should also be noted, that depending on how your start-up is structured, you may be legally required to pay yourself.
“I only hire contractors and don’t have employees – I don’t have to file anything, right?”
Wrong. If you pay contractors, freelancers, or attorneys more than $600 per year, you have to issue form 1099-MISC to them and file a copy with the IRS. We can assist with the preparation and submission of these forms.
“I haven’t made any sales yet, but I have lots of expenses! Can I deduct them on my tax return?”
Sort of. All expenses incurred before your first sale are considered “start-up” expenses. Only a portion of these can be deducted in the first year; the remaining expenses are deducted over the following years. The rules surrounding start-up expenses can be confusing, and discussing these with an accounting firm like Freyman CPA is recommended.
You care about your start-up, and your trusted advisers should, too. It is important to work with advisers who are willing to put effort into understanding your particular business: what sets you apart? What are your main obstacles? At Freyman CPA we value the ability to think outside the box. We adapt to developing trends to ensure that your company moves ahead of the pack and stays there. As part of our services, we emphasize education; we ensure that you benefit from our work by educating you on the important matters that we handle. If we help you prepare for a round of external capital raising, we want you to understand what to consider the next time you raise capital.
Many advisers offer practical, effective answers. We pride ourselves on offering innovative solutions that not only solve your financial and tax concerns, but that put your start-up in an even better position.
We are invested in our clients’ success. As a start-up, you should surround yourself with advisers who have your company’s best interests in mind, and who offer tailored solutions to meet your needs. Please contact us if you would like to discuss how we can help your start-up move from the formative stage to an established, successful business.