The San Francisco Bay Area is an economic powerhouse and mecca for entrepreneurs of all types. Yes, when people think of Bay Area startups, they probably think of technology first, but other sectors thrive along the Peninsula too. For instance, consider how many advances in medicine and manufacturing began here. Tourism and food industries are significant economic drivers too. San Francisco is home to word class hotels and restaurants that launched here first.
Entrepreneurs from around the globe begin their journey in the Bay Area, from recent college graduates to seasoned business leaders. Even local families get “bit” by the startup bug and boost the local economy with a local drycleaners or bistro. As a CPA firm experienced in managing large, small, and between startups, we’ve supported many types of businesses. One commonality remains among all of them: the business structure they chose either supports a long-term business plan or hinders it.
Are you wondering what form of business for your startup?
When choosing a business structure, there are several options: sole proprietorship, LLC, S-corp, and C-corp. Non-profit status is also available if you want to establish a charitable organization. But which is the right one for an individual entrepreneur?
When evaluating the options, it’s important to consider every advantage and disadvantage for each. Suppose a startup is looking to get the support of venture capitalists. In that case, a C-corporation structure may be the best choice. If an individual expects to maintain personal control over a business and not answer to a board of directors, then an LLC might be the best choice. Overall, the structure will impact plans to expand a company over time or remain local. Differences between business structures include liability protections, governance, stock options, taxation, and filings. A Forbes article provides a simple explanation layout for each business model: https://www.forbes.com/sites/allbusiness/2021/07/06/llc-vs-corporation-choosing-the-best-structure-for-your-startup/.
It’s a complicated matter to manage the responsibilities of financial solvency. Local, state, and government tax rules can change frequently. Busy entrepreneurs handling the work alone can make honest mistakes. It’s essential to get this all right, or a company could fall apart before it’s had a chance to get off the ground.
The Harvard Business Review (https://hbr.org/2021/05/why-start-ups-fail) provides a good analysis of how a startup can fail. One key ingredient in the article discusses the importance of who an entrepreneur aligns with. Stakeholders, employees, and strategic partners play a significant role in the trajectory of the new business.
One of the most important strategic partners is a professional Certified Public Accountant well-versed in startups. Speaking to an expert about what business model to choose and how to move forward can put an entrepreneur on the right path. As one of the top CPAs for entrepreneurs in San Francisco, we’ve helped navigate many startups through the challenges of launching a business.
Do the Homework: Study up on startup business tools every entrepreneur can use
Here are some important links to help anyone ready to consider what form of business for their start up.
Small Business Administration – Start Up Business Toolkit: https://www.sba.gov/partners/counselors/instructional-materials-trainers/business-smart-toolkit
California Franchise Tax Board – Business models including S-Corp, C-Corp, and LLC: https://www.ftb.ca.gov/file/business/types/corporations/
Business tax due dates page: https://www.ftb.ca.gov/file/when-to-file/due-dates-business.html
IRS – LLC page: https://www.irs.gov/businesses/small-businesses-self-employed/limited-liability-company-llc
California digital media toolkit for business: https://business.ca.gov/calosba-media-toolkit/
To review more details about what form of business for your startup, visit our topic-specific page at https://www.safeharborcpa.com/startup/