This presentation looks at how startups can run into financial and legal issues when they first start and how to avoid those issues.

1. Failing to Startup
The Garage --- May 19, 2016
Joshua Lance and Curt Mastio
Where Startups Run Into Trouble

2. Objectives
Discussion on common areas where startups struggle,
particularly focused in the financial and accounting realm and
how to handle and succeed in these areas.

3. Presenters
Joshua Lance, CPA
Joshua Lance CPA,
LLC
Curt Mastio, CPA
Startup
Accounting
Advisors

4. Agenda
Understanding Tax Aspects for Your Legal Entity
Importance of Accounting
Funding Your Business
Building the Right Team
Takeaways
Q&A

5. Understanding Tax Aspects
of Your Legal Entity

6. What Legal
Entity Choices
Exist?
And What Do They Mean?
C-Corporations
S-Corporations
Limited Liability Company
Partnerships
Sole Proprietorship

7. What are the tax ramifications of
your legal entity?
Pass Through vs. Corporate Taxation
S-Corporation/Partnerships: Pass Through
C-Corporation: Corporate Taxation
Limited Liability Corporations: Choose Your Own
Adventure
Differences in deadlines (March 15 vs April 15)
Estimated Taxes

8. Where startups fail
with legal entity
choices

9. Considerations
C- Corp
Scale rapidly
Outside investors
Stock Options/Restricted Stock issuance
Utilize Retained Earnings for future growth
Easier for mergers and acquisitions
S-Corp

10. Considerations
LLC/Partnership
Good for service based business
Flexible arrangements
Legal protection
Pass through taxation
Sole Proprietorship
Instant business

11. Importance of Accounting

12. Why is
Accounting
Important and
What is it?
Accounting gives you the data to
understand how your business is
performing and provides the
information you need to make
actionable decisions for your
business.

13. A Startup’s Accounting Lifecycle

14. Why is
Accounting
Important?
Without accounting, you are flying
your business blindly.
Accounting is more than just tax
compliance.

15. Where startups fail
with accounting

17. Step 1: Understand Your Inputs
How do transactions occur in your business
Sales/Invoicing
Expenses/Bills
Inventory/Costs of Goods
Wages and Salaries
The processes that your business undertakes to operate
generates the inputs that needs accounting for.

18. Step 2: Implementing an
Accounting System
An accounting system enables the centralized processing of
your inputs in order to provide outputs like financial
reporting.
Implementing an accounting system will allow you to utilize
technology in order to manage your accounting and is not just
a one time process.

19. Step 2: Implementing an
Accounting System
Things to look for:
Cloud Based
Unlimited users and have multiple users at the same time
Integrate with other applications
Real time reporting
Be able understand it

20. Step 3: Actually use your
accounting system
An accounting system that is not used can’t help your startup.
Need to record transactions (invoices, bills, bank
transactions, etc.)
Regularly keep books up to date
Reconcile bank accounts for completeness

21. Step 4: Using System For
Financial Management
Cash flow management
Understanding profitability
Investor Relations
Tax Planning
Budgeting and Forecasting
Strategic Decision Making
Pricing

22. Where did the cash go?
Investors and lenders want to understand how you are going
to use their cash and how your business has managed its cash
Burn Rate
Pricing Strategies
Protect your margins
Price inline with your value proposition
Are you the Walmart of your industry, or the Whole Foods?
Cash Flow Management

23. Funding Your Business

24. How are you funding your
startup?
Bootstrapping
Bank loan
Friends and Family
Crowdfunding
Equity Financing

25. Equity Financing
Methods
Equity Crowdfunding
Outside Investors
Angel Investors
Venture Capital
Types
Common Stock

26. Where startups fail
with funding

27. Building The Right Team

28. Outsourcing for
Success
Why outsource?
Understanding your strengths and
weaknesses
Finding the experts that fill your
weaknesses
Managing the outsourced help

29. Employee vs
Contractor What makes the difference between
an employee and a contractor and
why does that matter?

30. Employee Costs
Hiring employees brings the added costs to your business
Payroll Taxes
Unemployment Taxes
Workers Compensation
Compliance Costs
Benefits (depending on size)

31. Where startups fail
with building their
teams

32. Takeaways
1. Choose a legal entity type (for tax purposes)
2. Separate personal from business expenses
(open a separate bank account)
3. Implement an accounting system
4. Leverage accounting system to develop
financial reports for strategic business decision
making (i.e. budgets, forecasts, etc.)
5. Understand and comply with your tax
requirements (i.e. sales tax, estimated tax
payments, state and federal requirements).
This often requires enlisting the help of an
expert (a CPA).
Action Items To Consider
For Founders

33. Q&A

34. Thanks!
Joshua Lance | josh@lancecpa.com | @jlancecpa
Curt Mastio | curt@startupaccountingadvisors.com |
@startupacctngad