This Week in Startups

The Top 6 Startup Finance FAQ’s | Startup Finance Basics w/ Kruze's Scott Orn

Dec 12, 2024

Scott Orn, COO at Kruze Consulting, shares his finance expertise tailored for startup founders. He tackles crucial questions like avoiding payroll tax and the complexities of shutting down a startup. Scott explains the importance of correctly classifying workers to avoid tax pitfalls. He sheds light on managing franchise taxes and discusses how to communicate with VCs about revenue. The conversation also covers the risks of venture debt, emphasizing disciplined financial practices for long-term success.

25:17

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Episode guests

Scott Orn

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Quick takeaways

Founders should not attempt to avoid payroll taxes by misclassifying themselves as contractors, as this can lead to severe penalties from the IRS.

A transparent and structured process is essential when shutting down a startup to maintain relationships with investors and manage liabilities properly.

Deep dives

Navigating Payroll Taxes as a Startup Founder

Startup founders often mistakenly believe they can avoid paying payroll taxes by classifying themselves as contractors for their own companies, a practice the IRS scrutinizes closely. This misconception can lead to significant penalties if the IRS determines the arrangement is an attempt to evade taxes, as they expect founders to adhere to proper payroll procedures. Instead of trying to navigate the complexities of tax avoidance, founders should focus on building their businesses and consider engaging payroll companies that can manage tax withholding and compliance automatically. By taking this approach, founders can avoid unnecessary legal troubles and concentrate on growing their startups.

Intro

2min

Navigating Worker Classification and Tax Implications

2min

Navigating Payroll and Contractor Compliance for Startups

4min

Navigating Startup Shutdowns: Investor Insights

16min

Navigating Startup Financing and the Importance of Discipline

2min

Todays show:

In the latest edition of Startup Finance Basics, Jason sits down with Scott Orn from Kruze Consulting to answer the six most important founder/startup questions around finance, accounting, and taxes.

Timestamps:

(0:00) Kruze COO, Scott Orn, joins Jason to dive into Finance Basics FAQs.

(1:05) How can I avoid paying payroll tax as a startup founder?

(6:54) How do you shut down a startup?

(11:33) Why do I owe Delaware $50,000 in franchise taxes?

(12:58) I’ve got my first customer lined up! How do I get paid?

(16:26) Can I tell VCs that implementation revenue is ARR?

(19:59) Should I raise venture debt when I raise my Series A?

Check out Kruze: https://kruzeconsulting.com Check out more Finance Basics here: THISWEEKINSTARTUPS.COM/basics

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