San Francisco and the Bay Area is a hotbed of entrepreneurship, but when you are setting up a start-up you need to do it the right way in order to avoid headaches down the line.
Yes, we know that there is a lot to do when you are opening a start-up, and you may spend many weeks of frantic involvement in the practical side of the business, leaving things like stock options, taxes etc., to one side until later. The “financial structure” of your business might be a “second thought,” but it shouldn’t be!
However, it is well worthwhile to ensure that your business is set up the right way from day one. As one of San Francisco’s top accounting firms for start-ups we can offer you a lot of advice and assistance with things such as business formation, stock options, and more. For instance, should you be a C Corporation, an S Corporation, an LLC, a partnership, or perhaps a sole proprietorship? We can help.
Many businesses are C Corporations, for example. This has several benefits. There is limited liability for the directors, officers, shareholders, and employees. Even if the owner leaves the company, there is perpetual existence. There are no limits to the number of shareholders, meaning that you can expand the business rapidly through the sale of stock, and there are tax advantages such as tax-deductible business expenses.
However, there are some disadvantages too. A C Corp is expensive to set up and there is more government oversight than on other businesses. There is double taxation, since revenue is taxed at the company level and also on shareholder dividends. (Perhaps you can begin to see already why it is worth talking to us as a San Francisco accounting firm for start-ups).
Maybe you should be an S Corp. This avoids double taxation because profits and losses are passed through to your personal tax return. The business itself is not taxed – only the shareholders are. However, there is a limit of 100 to the number of shareholders, which might make expansion more difficult. There are also stricter operational procedures. There have to be regular directors and shareholders meetings and the minutes of those meetings must be kept. There must be updates to by-laws, stock transfers, and records maintenance.
Then again, maybe you be an LLP. Or perhaps a sole proprietorship.
This is why talking to us as a San Francisco accounting firm for start-ups should be your first priority. The legislation is a minefield for the unwary, but we know our way through it and around it. Give us a call on (415) 742-4249 or email us on firstname.lastname@example.org and let us help you get your new business off the ground the right way.
Photo credit: david drexler via Foter.com / CC BY