9 ms·

1) Doing taxes correctly as anything other than a sole proprietorship is a huge pain in the ass, especially if you're selling things across state borders, and d

1) Doing taxes correctly as anything other than a sole proprietorship is a huge pain in the ass, especially if you're selling things across state borders, and doubly so if you're in California. I recommend finding a tax professional to handle that for you (the time it takes to do it yourself is generally not worth it). Also don't forget that if you're actually making money you'll need to pay estimated taxes quarterly. 2) Either learn basic accounting (if you don't already) and keep excellent records of all revenue and expenses business-related (ideally categorized into standard business categories) or find a CPA to keep your records straight monthly. A huge number of people get burned simply because they didn't keep proper records and then ran into tax or regulatory trouble later. 3) Definitely keep your business finances as separate from your personal funds as possible. Different checking account, different credit card, etc. 4) Think really hard before you hire anyone for anything, and if you do, make sure you're either doing 1099 correctly or get a professional to help with W2 stuff. Again, this is something that often comes back to bite people. And lastly, remember that most businesses fail and that failing at business is not something to be ashamed of. If it's not working out, don't make yourself miserable and mortgage your future to try and save it indefinitely - walk away and try again with the lessons you learned.

20years 7y ago
All of these points are spot on! I learned some of this the hard way and wish someone told me these things years ago when I went from sole proprietorship to LLC. Spending money on a good Bookkeeper, CPA and accounting software is well worth the money.
gshdg 7y ago
Note that a single-person LLC can file taxes as a pass-thru entity, which is essentially the same as a sole proprietorship. You do still need to separate your finances/accounts/etc tho.
- busterarm 7y ago
  Being a single-person LLC usually doesn't give you any of the legal advantages of having an LLC in case you get sued.
  - gshdg 7y ago
    I am not a lawyer. But my understanding is that it does shield your personal finances to some degree.
    - thoughtstheseus 7y ago
      Also not a lawyer but it seems unlikely. You can’t create a legal shell just to shield yourself from liability. There needs to be an actual entity. Or not, again not a lawyer.
      - firethief 7y ago
        Interesting. So what do you suppose the function of a Limited Liability Company with pass-through taxation would be?
      - Terretta 7y ago
        Depends if you are keeping the entity and its finances separately. If you can demonstrate your finances are not commingled, they can be considered as separate and distinct even when reporting taxes as pass through. So, for instance, document the seed money to the LLC, and any other money you put in, carry on the books. Similarly, pay yourself a salary or if doing “equity draw” again keep it full documented. Never pay for personal things with company funds.
  - 0xEFF 7y ago
    Citation?
  - CPLX 7y ago
    This statement is obviously incorrect. It’s literally the name of the thing, the two L’s stand for “limited liability”
    - wheelerwj 7y ago
      its limited, NOT absolute. If you are a single person LLC the claim can be made that the business is an alter-ego of the owner, and can then the corporate veil can be pierced.
ishan1121 7y ago
The last point. I think its the number 1 thing every new founder should know. Getting success on the first try is tough and very rarely people achieve that. In fact, Microsoft was Bill's second business
ryanmarsh 7y ago
I don’t like the tone of this advice. It’s very off putting. Look, do what you want. If you want a business start it. You’ll need a CPA and a book keeper. These are easy to find and low cost. I pay my book keeper $200/month and my CPA a few thousand each year. I literally have never bothered with taxes. I hand them to my CPA and just double check the numbers when he’s done. Same with my book keeper. I don’t deal with IRS letters and whatever I just scan them and forward them to him and he deals with it. Tax/accounting/finance are the easiest part of a small business. These jobs are easy to outsource because they’re well commoditized. Tax/finance/accounting for a small business can be challenging for a lay person but it’s routine for these professionals. Lastly, if you fuck up your taxes and accounting it’s not that big of a deal. The IRS is happy to have you sort it out and pay them what you owe with interest later. They’re very polite people. I should know. The dirty secret about starting a small business is that everyone’s back office is a total shit show. Ask any freelance bookkeeper or CPA what state their clients were in when they acquired them.
- akerl_ 7y ago
  Your comment amounts to the same advice as the comment you’re replying to: outsource your tax and overall finance management to a qualified 3rd party. I’m not sure why you felt the prior comment was “offputting”; they don’t say not to start a business, they’re pointing out that financials are an area that a business owner needs to address, and that outsourcing it is often the correct route.

20years 7y ago

All of these points are spot on! I learned some of this the hard way and wish someone told me these things years ago when I went from sole proprietorship to LLC. Spending money on a good Bookkeeper, CPA and accounting software is well worth the money.

gshdg 7y ago

Note that a single-person LLC can file taxes as a pass-thru entity, which is essentially the same as a sole proprietorship. You do still need to separate your finances/accounts/etc tho.

busterarm 7y ago
Being a single-person LLC usually doesn't give you any of the legal advantages of having an LLC in case you get sued.
- gshdg 7y ago
  I am not a lawyer. But my understanding is that it does shield your personal finances to some degree.
  - thoughtstheseus 7y ago
    Also not a lawyer but it seems unlikely. You can’t create a legal shell just to shield yourself from liability. There needs to be an actual entity. Or not, again not a lawyer.
    - firethief 7y ago
      Interesting. So what do you suppose the function of a Limited Liability Company with pass-through taxation would be?
    - Terretta 7y ago
      Depends if you are keeping the entity and its finances separately. If you can demonstrate your finances are not commingled, they can be considered as separate and distinct even when reporting taxes as pass through. So, for instance, document the seed money to the LLC, and any other money you put in, carry on the books. Similarly, pay yourself a salary or if doing “equity draw” again keep it full documented. Never pay for personal things with company funds.
- 0xEFF 7y ago
  Citation?
- CPLX 7y ago
  This statement is obviously incorrect. It’s literally the name of the thing, the two L’s stand for “limited liability”
  - wheelerwj 7y ago
    its limited, NOT absolute. If you are a single person LLC the claim can be made that the business is an alter-ego of the owner, and can then the corporate veil can be pierced.

ishan1121 7y ago

The last point. I think its the number 1 thing every new founder should know. Getting success on the first try is tough and very rarely people achieve that. In fact, Microsoft was Bill's second business

ryanmarsh 7y ago

I don’t like the tone of this advice. It’s very off putting. Look, do what you want. If you want a business start it. You’ll need a CPA and a book keeper. These are easy to find and low cost. I pay my book keeper $200/month and my CPA a few thousand each year. I literally have never bothered with taxes. I hand them to my CPA and just double check the numbers when he’s done. Same with my book keeper. I don’t deal with IRS letters and whatever I just scan them and forward them to him and he deals with it. Tax/accounting/finance are the easiest part of a small business. These jobs are easy to outsource because they’re well commoditized. Tax/finance/accounting for a small business can be challenging for a lay person but it’s routine for these professionals. Lastly, if you fuck up your taxes and accounting it’s not that big of a deal. The IRS is happy to have you sort it out and pay them what you owe with interest later. They’re very polite people. I should know. The dirty secret about starting a small business is that everyone’s back office is a total shit show. Ask any freelance bookkeeper or CPA what state their clients were in when they acquired them.

akerl_ 7y ago
Your comment amounts to the same advice as the comment you’re replying to: outsource your tax and overall finance management to a qualified 3rd party. I’m not sure why you felt the prior comment was “offputting”; they don’t say not to start a business, they’re pointing out that financials are an area that a business owner needs to address, and that outsourcing it is often the correct route.