Using personal savings and CCs to pay for services now. Will Inc. (c corp) soon but don’t plan to monetize right away,or only get a little $ in early on. At what point should I create a company account and put some of my savings in, start using QuickBooks, talk to an accountant? Right after I inc.?
Incorporate as soon as you start spending a material amount of money on the idea, begin signing legal agreements and before you start hiring contractors or employees. You want to be protected legally first and foremost.
If you are going to raise real Angel and VC capital, then incorporate as a Delaware C Corp. VCs can’t invest in LLCs and S Corps, so if you go that direction you will need to reincorporate later. Btw - LLC and S corp structures are great if it’s a family owned business and you will not be raising VC capital. In fact we are an S Corp. :)
Once incorporated, you can get a separate bank account. Do that immediately. You want to clearly document all spend on the new business. Go back and document the spend before you were incorporated so you can get reimbursed later or roll it into equity.
When you have the bank account, use only that account for the business. Do not mix personal and business anymore. Founder to Business payments are something the IRS focuses on in an audit. So do it right.
Once all the spend is segregated, you can wait a bit before doing Quickbooks. Most people can gauge their spending pretty well by looking at their bank account. However, if you want more granularity and/or you have investors, then use Quickbooks. This is probably the time to hire a startup accountant like us.
We encourage companies to raise about $1M before working with us because anything less in capital means you are on a really tight budget and that capital could be better used for achieving product market fit. This is a judgement call for the founder. Some people like professional books earlier, which is fine. Just make sure you don’t waste money on accounting when you could be building traction. We can always go back and clean up compliance and accounting, but you don’t always get a second chance at traction. :)
Contact Us for a Free Consultation
Get the information you need