What Startups Need To Know About Taxes

WHAT DO STARTUPS NEED TO KNOW ABOUT TAXES?

Glenn McCraeChief Strategy Officer, CPAEarly Growth Financial Services

Michael ShaffCounselStubbs Alderton & Markiles, LLP

About Early Growth Financial Services

• Outsourced financial services firm providing small to mid-sized companies with an integrated financial solution

• Four platforms of services and support: transactional accounting, CFO services, tax, valuation.

• Services include: AP/AR, financial forecasts, cash management, financial statements, monthly close, 409A valuations, taxes

• 300+ successfully funded clients nationwide• #5 Silicon Valley Business Journal Fastest Growing Private

Company Award 20132

About Stubbs Alderton & Markiles, LLP

• Business law firm with robust corporate, public securities, M&A, and intellectual property practice group

• Our mission is to provide technically excellent legal services in a consistent, highly-responsive and service-oriented manner with an entrepreneurial and practical business perspective

• Focused on representation of venture backed emerging growth companies, middle market public companies, large tech companies, entertainment and digital media companies, investors, venture capital funds, investment bankers and underwriters

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Presentation Overview

What does “tax” mean to a startup?

If I have a startup, what do I need to worry about, in

terms of taxes?

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5 Areas of Tax Concerns

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Income Taxes – Implication of Entity

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• Choice of entity?– Pass-through– C-Corporation– S-Corporation– Partnership

• Are you affiliated with a foreign entity?

Income Taxes

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• Did you file for every year that you were incorporated?

• Have you taken advantage of available credits? – R&D tax credit– Enterprise zone credit

• Filing deadlines? • Estimated tax payments?• Quarterly filing?

Compliance/Registration Issues

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• Delaware filing through February 28th

• Local municipality - municipality or HQ location determines municipality

• 1099/independent contractors vs employee determination

• Foreign contractors

Payroll

• Are you using a payroll provider or DIY?

• Filing requirements are critical• Deferring payment of

employment taxes • When taxpayer fails to file a

return – 6020(b)

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Compensation Issues

• Options– Incentive stock options– Non-qualified options

• Profit interests• Restricted stock• Vesting• Section 409A

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Sales Tax

• Very, very complicated• Each region has its own

issues• Tax breaks• Form filing• What qualifies as a taxable

item?• Sales tax compliance tools• What happens to sales taxes

if business is terminated?

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Common Startup Tax Mistakes - Review

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• Choosing the wrong legal entity• Failure to understand tax

obligations• Not separating business and

personal finances• Not deducting business expenses• Using the wrong tools/systems (or

not using any)• Not paying quarterly taxes• Doing your own taxes, without

professional tax help

What to Look for in Your Tax Partners

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• Representation from legal and accounting side

• Experience with early-stage companies

• Comprehensive tax offerings• Knowledge of tax services• Audit support services

Q&A and Thank You!

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Glenn McCrae

[email protected]

415.320.5753

http://earlygrowthfinancialservices.com/

@EarlyGrowthFS

Michael Shaff

[email protected]

818.444.4522

http://stubbsalderton.com/

@StubbsAlderton