Practice Management Small Business

Startups and Tax Season

Written by Nellie Akalp

Helping your startup clients understand the implications of their choice of business structure can help them both now and later.

If your client base consists of a lot of startup businesses, you might have to do a bit more handholding during tax season than you thought. Most likely you’ve helped them get the business on its feet already, offering advice on setting up bank accounts, choosing a legal structure and more. But no matter how hard you tried to prepare your clients for this busy time of year, you most likely have some pretty stressed-out business owners needing you more than ever. Here’s how to not only survive tax season but come out a hero to your small business clients.

“Be There” for Them

Being available to support your clients is easier said than done during your busiest season. But you know your startup clients are going to need a bit more TLC this year, and if you can guide them through the season correctly, next year will be a lot smoother.

Because you don’t want to miss out on any potential revenue, make sure you have some temporary workers or backup to cover all the work coming in. Let your clients know you may not answer your emails or voicemails as quickly as you normally do. Giving them a time frame for when they can expect a response from you (such as within 24 hours or 48 hours) will calm their nerves and keep them from leaving message after message.

It’s important to show your startup clients how much you care and how dedicated you are to their businesses, so they’ll keep you on board as their business grows.

Go Over Startup Costs in Detail

You’ve probably already explained the IRS classification of tax deductions for costs associated with starting a new business. Expenses considered either “investigative” or “opening-a-business” costs qualify, but your startup clients may forget to consider expenses such as web hosting fees, incorporation fees and the money paid to you (their accountant) for helping set up the business. Have your startup clients go back over their expenses and you may help them save money.

Make sure you explain the changes to tax deductions due to the new tax law. Businesses now have new limits for certain fringe benefits and entertainment expenses (50 percent of food and beverages are tax deductible expenses, but entertainment is no longer deductible). Even if your clients don’t have these expenses to worry about now, alerting them to these changes could affect how they conduct their businesses in the future.

Plan for Growth

Did your startup client already choose their business structure before hiring you to do their finances? If they did, it’s a good idea to show them how their choice affects their tax obligations and how changing their entity would affect their businesses.

If your client chose to start as a sole proprietorship, as their business grows, they might want to change to a more protective structure like a corporation or LLC. Not only will it give your client protection from personal responsibility for the business’s debts, but if your client wants to sell shares down the road or attract investors, the business must be structured as a C Corp.

Make it a point to find out what’s involved in changing a business entity in your state and then advise your client of their options. In some states the process is simple and involves just filing the proper documents with the Secretary of State’s office. Other states may require dissolving the original company before forming the new one. If you don’t have the time to spend with your client to talk about business structure at this time of year, you can partner with an incorporation expert to handle the details.

No time is better than tax season to show your startup clients how important you are to the success of their businesses. Going above and beyond to make them feel comfortable and confident in your skills can go a long way toward keeping them on your client list.

What kinds of issues do you find startups need solutions for this time of year? Let us know!

About the author

Nellie Akalp

Nellie Akalp is a passionate entrepreneur, small business advocate, and mother of four. She is the CEO of CorpNet.com, a trusted resource for Business Incorporation, LLC Filings, and Corporate Compliance Services in all 50 states. CorpNet also offers business dissolution services. Nellie and her team recently launched a partner program for accountants, bookkeepers, CPAs, and other professionals to help them streamline the business incorporation and compliance process for their clients. More info at: CorpNet.com/Partners.

2 Comments

Leave a Comment