As a founder, you may be inclined to do everything yourself when you’re first starting out. Until you have a strategy to bring in revenue, it can be challenging to justify expenses. This strategy is usually a good idea, with a couple of exceptions — legal and financial matters. Though attorneys or accountants are not required to launch a startup, having access to their expertise is helpful to get your startup set up correctly and to support continued growth. In this post, we’re looking at what you need to know when it comes to working with professionals related to legal and accounting for startups.
Why Startups Should Get Professional Support
Most founders aren’t familiar with the legal and financial matters required for startup success. Of course, you can research and try to learn, but doing so takes valuable time away from your primary responsibilities. (And when you’re starting a new business, you have a lot of responsibilities.)
Instead, it’s smart to consult with professional service providers for legal and financial expertise. When you hire a professional who’s an expert, you have greater assurance that things will be done correctly.
It’s not an “all or nothing” decision whether to work with attorneys and accountants. You also have the option to consult with them for guidance and then handle the implementation yourself.
Legal for Startups
One of the first decisions you’ll make when launching a startup is determining the type of business it will be — the corporate structure. A sole proprietorship is the most simple and straightforward option that generally only requires a business license in most states. Partnerships, LLCs, and corporations have additional requirements that can vary by state and they can become increasingly complex depending on your business’ specific requirements.
An attorney can consult with you regarding the best corporate structure for your business. They can offer a full-service package, working with you to complete the forms and submit them. Or they can review the documents you complete prior to submission and guide you on how to properly file.
Establishing and running your startup includes navigating, completing, and submitting various legal documents. There are requirements that you’ll need to understand, both with this initial step of creating the business and also as you make decisions down the road.
When You Need an Attorney
It’s also a good idea to consult with an attorney for any major business decisions so you understand any potential legal ramifications. Before you purchase or lease property, establish a venture with another organization, or sign a contract, you should discuss the situation with your attorney first.
Additionally, attorneys can be helpful for establishing and reviewing legal documents, like lease agreements, customer and vendor contracts, and employee contracts. They can assist with copyrights, trademarks, and patents, and they can also support merger and acquisition activity.
Accounting for Startups
More than 40% of all startups fail within the first four years. Many factors contribute, but one of the top reasons is cash flow problems. As a result, it makes sense to have some accounting and financial assistance up-front. You’ll want to get your finances set up properly and get a process in place for financial record-keeping that can be managed efficiently until you can bring in a dedicated resource to take over this responsibility.
Many of the decisions described above also have a financial impact. It’s a good idea to consider support from a financial professional when you engage an attorney. Just like with legal assistance, the support you get from a financial professional can come in a variety of forms. You can hand off all financial matters. Or the professional can set up a process and train you to do it yourself. (For example, payroll or bookkeeping procedures.)
When to Consider Accounting for Startups
Accountants can help your startup with cash planning and forecasting, tax planning, bookkeeping, and reporting. Some can help with business strategy from a financial perspective as well.
At a minimum, you’ll want to run any business decisions by an accountant with potential for tax or accounting ramifications. Their insight will help you understand the potential impacts so you can make an educated decision.
Hiring professionals to support your startup makes a lot of sense, especially when you’re just getting started. Bringing in skilled professionals allows you to focus on other aspects of the business with confidence.
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