Startup Taxes and Accounting: Finding services, Best practices, & How not to go to jail


4

There are many money issues that neither add to my code base nor user base. For example:

  • payroll taxes and excise taxes
  • W2 W3 W4 I9 941 940 1120 + all the equivalent state forms
  • all of those accounting filings to the government (quarterly federal, monthly in some states, etc)
  • and a whole bunch more that I'm not yet aware of but could still put me in jail :(

How do I not spend all my time immersed in IRS publications or QuickBooks?

I have been told to find people & services like:

  • CPAs
  • Enrolled agents at the IRS
  • Bookeeping products & services (Like QuickBooks, SmartBooks, InDinero, OutRight)
  • Payroll services (Like ADP, Paychex, SurePayroll, or Intuit Payroll)
  • Tax attorneys
  • Temp CFO services

(AHH there's so many!)

but for a startup that (and I feel like this is many of you):

  • Makes very little (or no) revenue
  • Needs to pay people meager salaries
  • Only spends money on things like rent, computers, and servers
  • Has a little bit of money in the bank
What are the best ways to find help on the aforementioned issues? I personally do not know anybody in the professions listed above. Are there firms people can recommend?

How much of this do you believe is reasonable to expect startup entrepreneurs to do themselves at this kind of stage?

Who is the right type of person to find to help me with these issues?

Is there a Yelp-like site I don't know about for these types of people?

I am wary of random Google or Craigslist ads offering these services because of fruad and embezzlement concerns.

I realize that "A solution to all the money stuff" is not a realistic expectation to have of a startup at my stage within a system that is so fundamentally complex. Nonetheless, I would greatly appreciate any pointers or lessons people have had dealing with these housekeeping issues and specifically how they overcame them with as little disruption to their greater goals as possible.

Thank you all very much.

Getting Started Finance Tax Accounting

asked Jun 13 '11 at 14:32
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Evan
133 points
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2 Answers


1

You basically have two choices: do it yourself, or hire someone.

If you do it yourself, you'll find that it takes you two or three weeks learning the basics and getting everything set up, after which you'll spend about an hour a week on this stuff (at least until the company gets a lot bigger). This is how we did it at my company. Until we hit millions of dollars in revenue and dozens of employees, it took about half a day a week at most to manage everything. This is a good choice if you're trying to bootstrap and save money and you're willing to spend time instead of money.

If you hire someone, you're really just looking for a bookkeeper. Bookkeepers are pretty cheap especially when you don't have a lot of work for them to do.

You may want to use a real accountant for the year end tax stuff which can be pretty complicated, and have the accountant teach you how to do the daily bookkeeping stuff yourself to keep costs low. In this case you might expect to pay a few thousand dollars a year for the tax filing (or less depending on where you live) and occasional consultations when you're not sure what to do.

The best way to find people is the way you do anything: ask around! Ask other startup founders in your area for recommendations, ask family members and friends if they know any accountants, ask your lawyer to recommend an accountant or ask your accountant to recommend a lawyer.

answered Jun 17 '11 at 12:03
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Joel Spolsky
13,482 points

0

One option for a very early startup is to not hire employees. If you want to offload some work, hire contractors on a 1099 basis. With that, all you have to worry about is getting the 1099 submitted for each employee at the end of the year. Just make sure you follow the IRS guidelines to treat them as contractors instead of employees (though the guidelines are very fuzzy) and make sure the contractors know to pay their taxes.

Another consideration if you have skills that apply to the consumer level is to barter. I've got a CPA in the family that trades tax preparation and periodic advice for having his home network setup and periodic questions. This can be a significant money saver early in the startup process.

answered Jun 17 '11 at 12:53
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B Mitch
1,342 points

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