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How an Accountant Can Help You Grow & Scale Your Business

June 3, 2020 in Accounting, Business Formation, Resources

Looking to make your small, self-owned business grow? One of the best things you can do is to hire an accountant who can guide you through the major financial decisions involved in doing so. There are arguably quite a few involved, and each one is important and will play a vital role in the future of your business.

In this article, we’ll give you a basic overview of what to expect and the ways that a certified accountant can guide your next steps.

Moving Forward as a Small Business

Before we proceed, we’d like to give you an idea of what you can expect moving forward.

Depending on how your business is set up currently, you have several routes you can take to effectively scale up your operation. For entrepreneurs (i.e. self-employed individuals), the most common options that many people go for are a) transitioning to a sole proprietorship, and b) registering as an LLC (limited liability company).

Both options have their pros and cons. From a financial standpoint, some of the key differences between the two include:

  • Sole proprietorships require minimal paperwork to set up and maintain. LLCs, on the other hand, have much more stringent requirements.
  • An entrepreneur with a sole proprietorship exposes themself to business liabilities that can put their personal assets at risk. LLCs effectively minimize this risk by providing protection from commercial lawsuits, debt, and similar threats.
  • Sole proprietorships are subject to fewer taxes than LLCs. The processes involved in filing taxes as a sole proprietor are also simpler. However, when an LLC grows in scale (e.g. hires more employees), the potential tax savings could surpass those of sole proprietorships.

There are other key differences as well. What’s important to know is that each one is a viable choice, but the right one for your business will depend on many different factors.

How an Accountant Can Help

As you can see, knowing which path to go on is already a complex decision. The applicable concepts and pertinent laws can be understandably confusing, especially if you’re a small business owner who has so far only been involved in their own finances.

This is where the help of a certified accountant can be immensely helpful. They’ll be able to simplify the many concepts involved such as asset protection and taxes for entrepreneurs. With their aid, you’ll be able to make better decisions as you’ll have a better grasp of the relevant subject matter.

In addition to this, an accountant can help you acquire and submit all the documents that are needed in scaling up your business. They’ll be able to facilitate the process of setting up your sole proprietorship or LLC—depending on your choice—and continue to provide their services for all future requirements.

Conclusion

Hiring an accountant, when everything’s said and done, is simply the smart thing to do. Small business owners often struggle to scale up because they lack the resources and knowledge to do so in the first place.

When you hire an accountant to share the burden, you give your business the chance to grow while also providing yourself the time and energy you need to focus on other aspects of your operation.

We provide accounting services for entrepreneurs in Boston, and we’d be happy to help you take your business to the next level. Send us a message to find out more!

Should I Register My Business in Delaware?

January 7, 2020 in Business Formation

Despite being a tiny state, Delaware has great importance in the corporate world. The small state incorporates some giant corporation and traded companies such as Wal-Mart, Coca Cola, and Google. It is because Delaware has a history and reputation of corporation-friendly laws. So when it comes time to launch their businesses many entrepreneurs immediate think of registering their companies in Delaware.

However, what if your company is not located physically in Delaware or you run an online business? Will it offer the same benefits to your company?

Unfortunately, the answer is, “No.” In case your business is based in any states other than Delaware, you will have to face additional obligations and costs when you form your business in Delaware. While Delaware offers plenty of benefits to its home businesses, it also has some disadvantages that outweigh these benefits if you are not aware.

Where to Register

Whether you are a startup or you own an established business, you need to follow certain rules to determine if you should incorporate your business in any state.

Remember that regardless of the type of business you have, it has to be registered in the state where you are physically present. There are set up rules for all types of businesses that help entrepreneurs determine whether they have a physical presence in any state and should register there.

For example, your business will be considered to have a physical presence in any state and needs registration if:

  • You have a bank account in that state
  • You have working employees in that state
  • One of the shareholders or owners lives in that state
  • You have office or workspace in that state

Simply put, if you live in Texas, you need business registration in Texas. If you have employees in California, you have to register your business in California, even if you do not physically have a location within the state.

Reasons Why Registering in Delaware May Not Be a Good Idea

It is important to note that registering in Delaware does not offer the same benefits to every business. No matter how advantageous business incorporation in Delaware may seem, if you are a startup or runs a small business, registering in Delaware may not be a good idea.

●        Double Annual Franchise Tax

This is, without a doubt, one of the main drawbacks of registering in Delaware. When you register your business in Delaware as your home state but your business also has physical nexus in other states, it doubles your registration fees. Having nexus physically in any other state requires business owners to register in that state as well. That means businesses need to pay annual franchise taxes in both Delaware and the other state.

That is to say, if the advantages of registering in Delaware do not mean much to your business, there is no point in taking an additional expense or administrative time for incorporation in Delaware.

●        State Tax

No matter where your business is registered or what tax requirements a specific state has, as long as your corporation has a connection with any state, the state demands its share of profit.  So even though Delaware does not require state tax filing if no income is generated in Delaware, this doesn’t necessarily mean that your business can totally avoid state income taxes or state sales taxes in other states.

●        Added Cost of Registered Agent

To incorporate in Delaware, the corporation needs a registered agent who must be a Delaware resident. Business owners need to provide his/her Delaware’s street address to receive all legal documentation on behalf of their corporation. A registered agent is hired to provide these services to businesses, which is definitely an additional expense.

Benefits of Registering in Delaware

Registering or incorporating your business in Delaware holds several benefits, especially for home-based businesses. However, many small businesses do not notice these benefits due to complexity and cost. Some of these benefits include:

●        Friendly Law for Business

There is no denying that Delaware has some great friendly laws when it comes to structuring your business. The state offers flexible terms and working environment for board members and corporations. This might sound surprising for you. Delaware has a gold standard when it is about the corporate law environment.

Many giant corporations register businesses in Delaware due to its “corporate veil.” Because Delaware’s corporate veil is considered the thickest among 50 US states, that is what makes forming LLC in Delaware less risky as compared to other states.

Moreover, Delaware runs a separate court system named” Court of Chancery” to deal with corporate issues. The well- established court system expertly resolves complex corporate and law matters. The corporate attorney in the court specializes in the business laws of Delaware that make business matters hassle-free to handle.

●        Suitable for C Corp Looking for VC and Outside Investors

You might have seen many investment banks and VC backed ventures and startups choose to register in Delaware.  If you are considering VC funding, choosing Delaware would be undeniably a smart choice. By choosing Delaware, you will not have to convert your corporation when a venture capitalist demands it.

However, if you are currently registered in state other than Delaware and want to convert your business to be a Delaware corporation in the future, this can easily be done and the process is usually very painless.

●        Foreign Owners with Absolute No Physical Nexus in Any States

This is another benefit of registering a business in Delaware if you are a foreign owner. The flexible business statute and laws of Delaware not only permit but also provide efficient business procedures to the foreign owners who do not have any physical nexus in any other state. Foreign businesses can easily manage mergers, conversions, transactions, and transfers due to flexible tax laws.

Conclusion

Understanding the corporate laws and navigating the various state jurisdiction requirements can be complex for business owners.  Instead of just going with the “norm” or taking advice from the internet business owners should consult with their CPA to make sure that they are launching their businesses in the right foot and avoiding unnecessary expenses and administrative headaches.