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What is a big no-no as a startup founder?

Vanessa Kruze, CPA, is a leading expert in startup taxes and tax compliance. Her team at Kruze Consulting has filed thousands of tax returns for companies that have raised billions in VC funding, and her work has been diligenced by leading VCs, attorneys, and M&A teams at the largest technology companies.
Vanessa Kruze, a highly-experienced CPA, brings valuable tax expertise to startups, drawing from her rich background at Deloitte Tax and as a financial controller for a $20 million startup. As the leader of Kruze Consulting, recognized multiple times in the Inc 5000 list, she specializes in navigating the complex tax landscape for startups. Her firm is known for delivering precise and strategic tax solutions, delivering tax credits utilizing advanced tools to ensure compliance and optimize tax benefits for startups throughout the United States.

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Lots of these answers are excellent - I’d like to offer two tips on avoiding breaking the law, amassing significant government fines and potentially making it more challenging for your company to raise venture capital.

What is a big no-no as a startup founder

I am a CPA who works exclusively with funded startups - so I have a very particular view into “no no’s” startup founders can make. The companies I work with have raised over $500 million in venture funding in the past 12 months alone. My team is occasionally also brought in after a VC finds and exciting company that needs help.

Here are two mistakes startup founders should avoid at all costs:

  1. DO NOT MESS UP YOUR PAYROLL TAXES. The IRS can press charges on the company owner and/or individual responsible for making egregious payroll tax mistakes. Don’t take any chances, you really need to get a good payroll provider when you start paying salaries. Don’t pay your people outside of a payroll system. Fixing this is hard, auditing this is hard, and you can end up paying IRS penalties and paying your accountant a ton to make things right again. I always recommend a cloud-based payroll system, usually Gusto. You want a system that runs automatically and automatically takes care of payroll taxes. Starting and running a small business is difficult enough, you don’t have time to deal with payroll twice a month. And, trust me on this one, VCs do not like it when they invest capital into a business only to have it go out the door in the form of IRS penalties. Oh, and it’s not great to have the IRS pressing charges against a founder during a fundraising process either!!
  2. File a tax return every year. Even bootstrapped, loss-making startups need to file federal tax returns each year. (I’ve written about this on Quora before, here). There are significant fines for failing to file your taxes, even if you are losing money, so don’t forget! I’ve got a few tax compliance/deadline calendars posted on my website, but your best best is to hire an experienced startup tax CPA.

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Startup Taxes
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