You are disruptive. You are SoLoMo (or is that MoSoLo?). You are ready to take your market by storm. But have you laid the accounting and tax groundwork for future success? A few simple things upfront can pay big dividends later, or cause huge headaches if they aren’t done. Here are a few financial tips every start-up should make sure they do.
Pick a business structure. Deciding what type of legal entity to become is a big deal. It impacts protecting business assets, shielding personal assets from business creditors, income tax requirements and many other things. This is not an area to cheap out. Hire a good corporate lawyer to help you. If you think this is not worth the money, watch The Social Network on Netflix, then reconsider.
Open a bank account. PayPal and crypto-currency have their place, but your future employees, your future landlord and the government all want cold hard cash. Don’t use your personal account – you will just have to sort it out later. Opening a bank account is a pain, but just do it before you are too busy with everything else.
Get an Employer Identification Number from the Internal Revenue Service. Another simple thing with big consequences. You can’t pay employees, pay taxes or get credit without one. It’s easy to do on the IRS website, and not having one will cause big problems.
Know your tax requirements. There are income taxes, sales taxes, payroll taxes and more. They may be at the Federal level, the state level or the local level. And just because you don’t know about them doesn’t get you off the hook. Many taxes fall on you personally if they are not paid, so make sure you have a good understanding of what you are required to collect and pay, and when.
Keep good records. A shoebox is awesome – for storing shoes. Saving things in your email, or not keeping things at all, may work for a while, too. Eventually, you will need to produce records for the IRS, a prospective bank or investor or a possible acquirer, and you will be sorry that you didn’t have good records from day one.
Surround yourself with a great team. There are lots of lawyers, accountants, real estate brokers and other professionals who love working with start-up businesses just like yours. Get out and meet them. Ask other entrepreneurs who helps them. These people are too important to your future success to pick them out of a Google search.
If you have questions, contact your CPA.
Mike Drexler, CPA