Before starting a business, most people know they should consult an attorney, but many don’t think to consult a CPA. In fact, it’s not just a good idea to meet with a CPA before starting your business – it’s a must.
Entrepreneurs preparing to embark on a new business venture will often try to save as much money as possible during the start-up phase, but choosing not to seek out professional advice from a CPA is the wrong place to cut corners. Yes, you can certainly set up a new business on a convenient legal website and get by without paying a professional CPA in order to do so. However, taking the DIY approach to starting a company will make mistakes very likely, and these mistakes will compound year over year – costing you dearly.
Why you should consult a CPA before starting a business
There are many, many reasons to consult with a CPA before starting a business. Whether the goal is saving valuable time, ensuring legal compliance with the IRS, or getting a second set of eyes on your business plan, CPAs with business consulting experience can make a world of difference for you and your new company.
Here are just a few reasons you should consult with a CPA before starting your business:
1. A CPA can help you decide how to structure your business.
It’s one of the very first business decisions you’ll make and it’s certainly one of the most important. What type of business entity should you choose for your business? Should it be structured as an LLC, a partnership, an S-Corporation, or a C-Corporation? The nuances of each type of business structure can be complex and whatever you choose will have major implications for your tax burden and the personal liability you will be facing. This is why it is vital that you consult a professional when deciding what’s right for you.
2. A CPA can review or help you build a business plan.
CPAs with business consulting expertise have the unique ability to help assess the financial aspect of your business, but in a strategic way. Their perspective will put a numbers-focused emphasis on growth, taking into account the larger picture of all financial risks, startup costs, operating costs, and much more. With the help of a CPA, your business plan will be more iron-clad, realistic, and will help you get the financing you’ll likely need to get it off the ground.
3. A CPA can help establish which financial processes are best for you.
How does payroll work? Which financial software should I use? What’s the best way for my small startup to manage the books? These are all questions a seasoned CPA can help answer. CPAs can also help set up your bank accounts, give advice for tracking your day-to-day expenses, and offer guidance about proper budgeting. Ironing out these processes from the beginning will save you from a massive headache further down the line when it’s time to hire employees, grow your business, or even bring on your own internal accountant.
4. A CPA can help ensure your business stays compliant with the IRS.
Here’s the thing – you’re a business owner. You’ve started your business because there’s an industry, product, or service about which you are the expert. But unless the business you’ve chosen to start is a CPA firm, it’s highly unlikely that taxes are your bread-and-butter. You don’t need to be a tax pro, however, to know that it’s always in your best interest to be in compliance with tax laws and regulations (and any other rules the IRS and U.S. government put in place). We cannot stress this enough: you do not want to be on the IRS’ bad side. A knowledgeable CPA will stay abreast of tax law changes and can help ensure you’re paying the IRS what you owe, when you owe it, and not a penny more.
This issue may be one of the most important reasons to involve a competent CPA in the beginning. We’ve represented multiple clients who had no guidance (or at least no good guidance) regarding IRS requirements in the beginning. Although they created very impressive businesses, all IRS requirements were not filed, which led to unrealized tax returns and missed tax payments. This caused the IRS to assess huge penalties and file liens on personal and company assets and, eventually, made it nearly impossible for those clients to remain in business.
5. Building a good relationship with a trusted CPA is a valuable asset for the future.
Consulting with a CPA before starting a business and during the startup phase is a no-brainer. But it’s also a valuable relationship to maintain, especially when you find someone you can trust. As your business grows and evolves over the years, it’s a guarantee that you’ll have ups and downs and many questions along the way. Whether it’s time to begin scaling the company, identifying potential areas for growth, or tackling an audit from the IRS, a good CPA is an asset to have on your side during the good times and the bad times.
“This all sounds great,” you might be thinking. “But how do I go about finding the right CPA for me?”
How do I choose the right CPA?
There is no one-size-fits-all approach to finding the right CPA. Every business is different, every business owner’s needs are different, and it’s important that you have a good relationship with your CPA. In other words, you’ll want to actually like the person you’ll be working with.
Here are a few basic guidelines to keep mind:
- Make sure they’re technically proficient and stay abreast of new laws
- Make sure they’ll be available when you actually need them
- Make sure they’re someone you get along with, trust, and are comfortable sharing your life with
Keeping those three basic ideas in mind will get you off to a good start, but there’s more to consider. For a more in-depth look into choosing the right accountant for you and your business, read our thoughts about the process here: How to Choose the Right Accountant.
Looking for a CPA with business consulting experience?
At Pine & Company CPAs, our services extend beyond accounting. We provide insight for new business startups, financial planning for businesses, counsel on which accounting software to use, assistance with payroll, and business health analytics.
We’re also proud to offer SuccessWatch, a one-of-a-kind business consulting service that helps grow profitability, control business costs, and much more. If you have financial questions about your business, we’re here with the answers. To take the next step, please contact us here.