Down-line accounting issues for companies raising money through Initial Coin Offerings are going to be far more complex than raising money through a regulated ICO.
DBBM to Speak at SBDC Sponsored Event April 25, 2017
On April 25, 2017, the SBDC of San Mateo is sponsoring an event titled "SOURCES OF EQUITY CAPITAL & HOW TO PREP YOUR CLIENTS." DBBM's own David Gosselin will be there to speak on behalf of the equity crowdfunding industry based on his industry leading experience in the space.
Unlike more traditional forms of equity financing (VC financing, angel financing, private equity) equity crowdfunding through Regulation Crowdfunding (Reg CF) an Regulation A+ (Reg A+) allows entrepreneurs the ability to dictate terms, utilize affinity groups, and market to the public. These are drastic differences compared to traditional equity financing.
dbbmckennon is a full service CPA firm with offices in Orange County, San Diego and Santa Monica. We specialize in companies filing with the SEC and utilizing equity crowdfunding through Reg A+ and Regulation Crowdfunding. For additional complimentary information regarding this topic or other questions you may have please call one of dbbmckennon‘s offices located in Southern California or contact us here.
Five Mistakes Startups Make
Five Mistakes Startups Make Following the American Dream and starting your own company can put you on the fast track to success, but it can also lead to the deep end of failure if not done correctly. Here are five accounting mistakes many startups make that hinder their potential.
- Mixing business and personal finances – So many startups utilize their personal expenses for business use and vice versa. Open a bank account for your business, transfer money, and keep the costs separate. This will help minimize any negative tax consequences.
- Entity type – A partnership can take many forms, an LP, LLC, LLP, S-Corp, or C-Corp. There are certain entities that are better for certain businesses. In addition the number of owners can effect which type of entity you should use. Not all businesses can distribute earnings in the same way. Pick an entity that best suits your business by asking a qualified advisor.
- Not knowing obligations – That’s right, good old Uncle Sam and most states want theirs. If you don’t have a reseller’s license, you will owe the state sales tax. If you own an LLC and distribute guaranteed payments rather than W-2 wages, know that you will owe taxes on compensation received. Know your obligations.
- Have the right tools – Use an accounting system that fits your company needs. Do you need software to track your client relationships, email blasts, etc…? Make sure you use technology that fits your company and helps it grow.
- Planning – Many startups think that they will be generating revenue from day one. They find that it is harder to get off the ground than anticipated and they run out of money before they even start. Make sure that you have enough money saved to live while you build your business.
And one for the road:
Consider and 83b election when forming your C-Corp. It needs to be filed within 30 days of incorporation. The election will minimize immediate tax consequences and lock-in your basis.
dbbmckennon is a full service CPA firm with offices in Orange County and San Diego focused on providing quality accounting and consulting services at reasonable rates. For additional complimentary information regarding this topic or other questions you may have please call one of dbbmckennon‘s offices located in Southern California or contact us here.
Raising Money for Inflection Points
As a business gets off the ground and ideas are swirling in the air, startup founders start committing significant time to raising money. The question is how much money should a startup raise? Most founders will answer “as much as possible,” however, that is often the wrong answer for investors. Some founders think it’s important to get a high valuation in hopes of more money coming in the door upfront. This can also be another potential pitfall. Valuations are great, but the market sets the price of your company. A valuation can be high, but the market may indicate and act otherwise. A company will never raise more money than the market is willing to invest.
What founders should be focusing on is infection points in their business. When raising money, there should be a reason as to why you are asking for $5M compared to $1M. An investor needs to know where that $5M is going to get the company. If a company can only accomplish half their goal with $5M, than that $5M is already lost money to an investor. If a company can have a finished product ready for market with that $5M, that is an inflection point in your business that an investor can get behind.
As you map out your business, think long-term and realize that your business likely won’t get big money up front. It will take a few small tranches of money, until larger sums are realized. Accordingly, think of fundraising like a road trip. Plan your path and know where you need to take a pit-stop (i.e. get more money). Think about each tranche of money and how it will relate to an inflection point in your business (i.e. working prototype, completion of code development, finished product, commencement of revenue, etc…). Think about how much of a runway you need to reach each inflection point and how much money will be required to get there. Creating a plan and a road map will help investors understand that you have a structured plan to execute an idea.
dbbmckennon is a full service CPA firm with offices in Orange County and San Diego focused on providing quality accounting and consulting services at reasonable rates. For additional complimentary information regarding this topic or other questions you may have please call one of dbbmckennon‘s offices located in Southern California or contact us here.
Five Accounting Resolutions for 2013
Improving your company should be a constant effort. Here are fie resolutions to make for 2013 to improve your company's accounting and business.
- Outsource the work that doesn't benefit your top or bottom line – Business owners should not spend one, two, three or four or more hours a day doing administrative work that doesn't directly impact the company’s growth and future. Business owners are the face of the company and shouldn't spend all their time behind a computer and a stack of paper. Outsource the accounting work to a qualified accountant that can take over receivables, payables, and general oversight of the company’s accounting needs. Use a payroll company that can also help you with HR related issues. Don’t try to wear all the hats in the organization.
- Review – Create a monthly or quarterly review process. Review margins, receivables, payables, and cash forecasts. Sometimes business owners aren't as profitable as they think they are. You may get a great margin on a sale, but are you thinking about your overhead costs, how long the product sat on the shelf, etc? Are your prices to low/high? Your product/service may need price adjustments. Reviewing these items regularly will ensure your company doesn't fall behind needlessly.
- Automate – As your business expands, make sure that efficiencies are found where available. Credit card processing, storing bank information for clients, or automating payments can assist in becoming more efficient. Upgrading your accounting software or billing practices can also help.
- Plan – Speak with your CPA a few times throughout the year not just at year end. Planning with your CPA can help minimize taxes. Planning expenditures, creating retirement plans, and taking advantage of certain deductions can all help minimize taxes.
- Take action – Most resolutions never get off the ground. Make a concerted effort to do at least one thing that will help your accounting in 2013. The first step is usually the hardest!
dbbmckennon is a full service CPA firm with offices in Orange County and San Diego focused on providing quality accounting and consulting services at reasonable rates. For additional complimentary information regarding this topic or other questions you may have please call one of dbbmckennon‘s offices located in Southern California or contact us here.