15 Essential Questions to Ask a CPA When Starting a Business

If I were hiring a CPA for a startup, I would prioritize experience in the particular trade over startups as a whole. Some foundational knowledge of specific industry technology and best practices keeps you conversant and maximizes your value in highly specialized fields. Yes, you do need experience to work as an accountant at a startup, particularly if you’ll be at the helm. But I’m not referring to experience with startups or experience as a controller.

Evaluate Expertise in Startup Taxation

• And while it’s pretty easy to download and complete a free financial model, you also need to make sure that information is interpreted correctly.
• Xero is another choice that we see good accounting firms recommending.
• In the most recent tax year, our clients got a check or payroll tax reduction on average between $50,000 to $60,000!
• Adtalem Global Education is not responsible for the security, contents and accuracy of any information provided on the third-party website.
• Life at an established firm, on the other hand, can get too comfortable.
• A trusted voice on tax planning and small business growth, he’s been featured in Globe and Mail, CTV, Global News, and CBC.
• This is a great way to get closer to your clients and offer them a higher-level service and become a true advisor to your startup clients.

Founder’s expert CPAs have guided countless entrepreneurs through every stage of their journey – from ideation to acquisition. We offer tailored services, including fundraising support, financial modeling, tax minimization, and more. Contact us today to set up a consultation and get answers to your most pressing startup finance questions. As a private company, startups are not required to do an annual audit by the IRS or any other governing body. Early-stage companies usually get audits when asked to by their investors, and as we’ve already mentioned, venture capitalists don’t usually start asking for an audit until a company is Series C or later.

• I’ve worked with all of these providers and each one has a unique offering, so it all depends on which one will best suit your client’s needs.
• During this process, your CPA can make inquiries, perform physical inspections, verify balances, and run other tests to confirm your financial statements are free from material misstatements.
• There are times when a VC may purchase shares that could be considered taxable events, such as when an investor purchases shares from a founder, providing the founder liquidity and triggering a capital gain.
• Startups are repeatedly undergoing due diligence as they raise multiple rounds of capital or when they eventually sell the business.
• CPAs specializing in forensic accounting assist with disputes or litigation.

Accounting Operations and Administration for Startups

• Section 382 was enacted to prevent corporations with taxable income from purchasing companies with large NOL carryovers and using the acquired NOLs to offset income.
• A professional accounting firm can help your company set up an effective system to make sure you don’t miss any qualifying deductions.
• We believe that startups need both a bookkeeper and an accountant, although it is possible for one person to do both jobs.
• After you pass the CPA Exam and have your experience and education, you still need to ensure you complete any additional requirements.
• Section 382 is a part of the IRS tax code that limits corporations’ use of any net operating loss (NOL) to offset profits.

A bookkeeper typically focuses on processing and recording transactions, including things like invoices, receivables, payments, and other essential functions. As your startup grows, you’re going to need a greater degree of accounting proficiency to create budgets, handle your financial statements, develop forecasts, and provide reports to your board. Raising capital or considering an acquisition means you’ll need skilled accounting practitioners to help you.

Over $25 million per year in startup payroll tax savings from R&D Tax Credits

A CPA translates raw data into insightful financial reporting and analysis. They prepare critical statements like P&Ls, cash flow, and balance sheets, explaining metrics and trends in Accounting Periods and Methods simple terms. Hiring a CPA for your startup goes beyond balancing the books; it’s about leveraging their expertise to gain a competitive edge. A skilled CPA can offer insights that shape strategic decisions, ensuring your startup is financially sound and poised for growth.

Importance of Industry-specific Experience

They analyze cash flow statements, balance sheets, budgets, capital structure, and funding https://www.bookstime.com/ needs to gain a 360-degree picture of your financial health. Tax deductions (often referred to as “tax write-offs”) reduce the adjusted gross income of a taxpayer, and can reduce the tax liability of a business or person. In general, the “ordinary and necessary” expenses required to run a business are tax-deductible, including things like rent, equipment and supplies, salaries, and other expenses.

Don’t Get Derailed Now That You Have Venture Backing

With this, CPAs help founders understand their numbers, receive better guidance, and can ultimately make better decisions. Handling your company’s accounting is a very important duty and a full-time responsibility. It is critical for your startup’s financial health and ultimate success. As mentioned before, as a startup founder, you may not have the time or knowledge to handle it properly. Many founders decide to hand-off the startup accounting responsibility to the CPA accounting experts. If you are looking for a startup accountant, look for a provider who knows your particular business model, as different types of early-stage companies have accounting particularities.

Who your startup needs to give this tax form to depends on how much you’ve paid your cash-basis contractors during the previous year, and what type of contractor they are. Specifically, startup cpa anyone who is not a corporation and was paid over $600 in aggregate will need to get a 1099. Your stage of fundraising has a direct impact on the return cost.