top of page
  • Writer's pictureBenjamin

๐—ง๐—ฎ๐˜…๐—ฒ๐˜€ ๐—ฎ๐—ป๐—ฑ ๐˜๐—ต๐—ฒ ๐—˜๐—น๐—ฒ๐—ฝ๐—ต๐—ฎ๐—ป๐˜

Taxes may be the elephant in the room for startups โ€“ something huge no one wants to admit (at least until it bursts through a wall).

There are a ton of nuanced yet impactful decisions when it comes to taxes. Letโ€™s highlight some matters to possibly address.

๐™‰๐™ค๐™ฉ๐™š: This is not intended as advice, seek an expert for guidance with any of these decisions.

๐—–๐—ผ๐—ฟ๐—ฝ๐—ผ๐—ฟ๐—ฎ๐˜๐—ฒ ๐—˜๐—ป๐˜๐—ถ๐˜๐˜†

ยท Determine how the business should be organized

ยท You may incorporate in a state other than your residence (e.g. Delaware). You still may have local filing requirements.

ยท Keep in mind that your selection may impact funding from investors and your personal liability, in addition to taxes.

๐—ฆ๐˜๐—ผ๐—ฐ๐—ธ ๐—ข๐—ฝ๐˜๐—ถ๐—ผ๐—ป๐˜€

ยท The decision between ISOs, NSOs, or RSUs has implications.

ยท Consider an 83(b) election to save on taxes later.

ยท Certain Stock Option Plans* require a 409(a) valuation.

๐—ฆ๐—ฎ๐—น๐—ฒ๐˜€ ๐—ฎ๐—ป๐—ฑ ๐—จ๐˜€๐—ฒ ๐—ง๐—ฎ๐˜…

ยท If required, sales tax must be collected by the seller at time of sale.

ยท The determination of goods and services subject to sales tax varies by state and city/county.

ยท Use tax is owed on some goods and services even if you were not charged at purchase (e.g. no tax listed on the sellerโ€™s invoice).

๐—–๐—ผ๐—ฟ๐—ฝ๐—ผ๐—ฟ๐—ฎ๐˜๐—ฒ ๐—ฎ๐—ป๐—ฑ ๐—ฃ๐—ฎ๐˜†๐—ฟ๐—ผ๐—น๐—น ๐—ง๐—ฎ๐˜…

ยท Taxes may be owed in any area connected to revenues, employees, offices, or other financial interests.

ยท These taxes must be paid on time to avoid penalties and fees.

ยท In some cases, the government can ๐˜ฑ๐˜ถ๐˜ณ๐˜ด๐˜ถ๐˜ฆ ๐˜ฃ๐˜ถ๐˜ด๐˜ช๐˜ฏ๐˜ฆ๐˜ด๐˜ด ๐˜ฐ๐˜ธ๐˜ฏ๐˜ฆ๐˜ณ๐˜ด ๐˜ฅ๐˜ช๐˜ณ๐˜ฆ๐˜ค๐˜ต๐˜ญ๐˜บ for unpaid taxes (even if you're set up as a corporation).

๐—–๐—ผ๐—ป๐˜๐—ฟ๐—ฎ๐—ฐ๐˜๐—ผ๐—ฟ๐˜€ ๐˜ƒ๐—ฒ๐—ฟ๐˜€๐˜‚๐˜€ ๐—˜๐—บ๐—ฝ๐—น๐—ผ๐˜†๐—ฒ๐—ฒ๐˜€

ยท Startups may prefer contractors over employees to avoid certain taxes and benefits. However, there are guidelines.

ยท Just because someone works for multiple companies does not automatically make them a contractor.

ยท Government agencies are motivated to classify those workers as employees in order to collect taxes (e.g. unemployment insurance).

๐—ง๐—ฎ๐˜… ๐——๐—ฒ๐—ฑ๐˜‚๐—ฐ๐˜๐—ถ๐—ผ๐—ป๐˜€

ยท Both homeowners and renters may be able to deduct a home office used exclusively for business.

ยท Generally, deductions for a home office (and utilities) are based on the percentage of residence devoted to business.

ยท Keep records of all your income and expenses from the outset. This will save you a ton of time later (e.g. if you seek fundraising or loans).

๐—ง๐—ฎ๐˜… ๐—–๐—ฟ๐—ฒ๐—ฑ๐—ถ๐˜๐˜€

ยท Tax incentives may be available even upon launch.

ยท Business tax credits exist around renewable energy, research and development, and locating in certain areas.

ยท Determine if any tax incentives sure are offset by other factors (e.g. it may be tough to hire future employees in a new location).

Even before revenues and major expenses, certain tax decisions can have major financial and growth implications, so seek advice early.

125 views0 comments


bottom of page