News & Press
Startup Founders Urged to Prioritize Accounting and Tax Planning
Excerpted from an article published by Long Island Business News
Starting a business can be both exciting and daunting, and while the potential upside can seem promising, the path for a startup may be packed with pitfalls, especially those that forego strategic advice from tax professionals.
While streamlined startups are usually efficient and adaptable, they often leave their founders juggling multiple roles, which can lead to mistakes. “Entrepreneurs often find themselves managing multiple aspects of their business, from operations and marketing to finance and HR,” says Shashi Singal, a tax partner at Anchin in Uniondale. “In the midst of this multitasking, it’s common for accounting to take a back seat to other priorities, and for occasional errors and misconceptions to happen.”
Learning the basics of business accounting beforehand can help founders avoid playing catch-up later, according to Singal, who suggests becoming familiar with some key concepts, including understanding the differences between profit and cash flow, knowing what counts toward book income and what is considered taxable income, and finding appropriate tax software order to establish accurate and efficient record-keeping. “While it may seem tedious at first, setting things up correctly from the beginning can save entrepreneurs the hassle and cost of fixing and cleaning up their records later,” she says.
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Forming a partnership may not always be the best choice for entrepreneurs. “C corporations may be an advantageous option for startup founders seeking to benefit from qualified small business stock provisions, which offer substantial tax savings on gains from the sale of eligible stock,” Singal suggests. But several other factors may influence a startup’s incorporation strategy. “Despite the lower corporate tax rate, many small businesses continue to favor pass-through structures to avoid double taxation and reduce administrative complexity,” she says.
Given the often-complex parts of a small business, deciding which type of structure is best involves detailed planning. “Ultimately, the decision on how to structure a business is shaped by a complex mix of tax rates, deductions and long-term strategic goals,” says Singal. “Business owners must carefully evaluate these factors to select the most tax-efficient structure for their unique circumstances.”
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