What are some smaller details of launching a successful startup that often get neglected? originally appeared on Quora: the place to gain and share knowledge, empowering people to learn from others and better understand the world.
First, a caveat--the biggest thing that will cause your startup to succeed or fail is finding (or failing to find) product-market fit. Amazing bookkeeping or back-office systems are not going to save a company that would otherwise fail, and horrible hygiene probably won't kill your company. (But it will cause you a bunch of pain down the road, so you might as well get it right early.)
Speaking specifically on the finance side, here are the things we strongly encourage startups to be careful about, in approximately sorted order:
- Don't mix the company's money and your money! Your company is a distinct legal entity from you--and as a result, there needs to be clean separation. Basically, the company should spend company money on company things. You should spend personal money on personal things. But don't mix the two.
- Use a payroll system to pay your employees. If you're paying employees, you need to use a payroll system. Period. Even if it's just a small amount, there are all kinds of annoying tax withholding payments and form filings that are required, and it's much easier to get this right from the get-go than to try to bolt it on later.
- You still have to file corporate tax returns, even if you made no money. Even if you made no money and owe no tax, you still need to file the federal and state returns. Yes, it's annoying.
- Corporate taxes aren't your only obligation! Many states have all kinds of other miscellaneous filings and taxes you need to complete or pay to keep your entity in good standing. For example, Delaware C corps need to pay a "franchise tax" and file an annual report. Companies in San Francisco need to file a business registration and pay "gross receipts" tax, etc. California also has a "statement of information" that's required. Federally, you may need to file 1099s if you'd paid contractors, etc.
The list goes on (and actually, we've written in much more detail about this topic ). So then the question is: how do you actually stay on top of all these requirements? I'd break down your obligations into three main categories, with a recommendation for who does each of them:
Tax and misc. compliance filings (e.g. federal taxes, state taxes, misc. filings, 1099s, etc.). We definitely recommend hiring a good tax preparer to help out with these. Of course, to actually do this work, the first thing they'll say to you is "Great, send me your books and I can get started". Which brings me to my next requirement...
Monthly bookkeeping (sometimes called the "month-end close"), i.e. the work of keeping your company's books up-to-date on a regular basis. Strictly speaking, you don't really have to do this monthly, but it's nice to have it done regularly so that you don't fall behind. I generally strongly recommend hiring a bookkeeping firm to do this work for you (and not just because we ), because it's time-consuming, subtle, and hard to get right. (Plus, if you've hired someone else to do it, you can focus on the more high-leverage aspects of running your business). But that leaves us with one other requirement...
Day-to-day financial items (like paying your rent, initiating payroll runs, sending invoices to your customers). For early-stage companies, I actually recommend that you just do these yourself in-house. Why? Because in the time it takes to write an email to your external provider describing exactly which bill needs to be paid, you probably could have just paid it yourself--and you have way more context than any other external provider will, about which things should be paid when and which things shouldn't.
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