No matter how smart you are, the only way it makes sense to do your own taxes is if your business is taxes. Otherwise, hire the woman who spent years learning this stuff and devotes her entire cognitive load to the task to do it for you.
Mistakes You Should Never Make
71–80 of 348 posts
Re: Mistakes You Should Never Make
#72Earlier quoted context omitted.
This cannot be overstated. If you give the sales team any room or freedom, they will make your life hell trying to keep up with "features" that outdo everyone else just so they can get their commission check. They don't have to deal with anything beyond signing of the purchase, so they don't care that it sinks everyone else to get that purchase.
Salespeople who sell products by providing false information are committing fraud on behalf of the company and should be fired.
That would result in mass unemployment in some sectors of industry.
The problem is that as long as your competitor says 'yes' and you say 'no' the competitor will get the customer.
Customers should be firing companies that provide false information during the lead-up to a sale. Then the sales people can stay employed and everybody comes out ahead.
Re: Mistakes You Should Never Make
#73Kudos, Seth. Really refreshing to see this kind of bare honesty, and takes a lot of courage to know that this post will probably be seen by all friends/family/coworkers. Thank you for writing this.
Thanks Ajay.
Re: Mistakes You Should Never Make
#74> In the early days I would often let potential customers think we already had a feature they wanted What. How is this even remotely acceptable? If discovered it destroys your credibility. Among your employees it destroys your credibility. If I was an employee and found out that this was happening, I'd be extremely upset. I wouldn't trust a thing you say. If you'll lie to customers, you'll lie to me.
What. How is this even remotely acceptable? If discovered it destroys your credibility. Among your employees it destroys your credibility. If I was an employee and found out that this was happening, I'd be extremely upset. I wouldn't trust a thing you say. If you'll lie to customers, you'll lie to me. Your optimism is endearing, but the vast majority of companies I've done business with do this. Often companies I've…
Since you are competing against people who will tell you that the feature they want already exists, people who are too honest in this area will quickly get filtered out of the marketplace.
It sucks, but there are lots of markets where the customer says "please lie to me" and gives their business to the person with the most reassuring lie.
Re: Mistakes You Should Never Make
#75Of all the financial mistakes you can possibly make running a company, withholding payroll taxes and then failing to remit them is probably the worst. Be thankful you caught this before the liability exceeded your available funds, because company operators are apparently routinely held personally liable when there's a shortfall, and I'm not sure that debt is even dischargeable in bankruptcy. What's worse, minor versi…
As a former transactional/commercial litigation attorney I too would see this issue regularly.
One interesting "hack" I would see clients do regularly as owner/employees, they would minimize their own salary to avoid payroll taxes, maximizing their distributions (distributions are not subject to payroll taxes). Unfortunately for them the IRS accounts for this hack, and if an IRS audit finds the salary isn't reasonable then those amounts will be subject to payroll, social security, medicare, potentially higher income tax, and moving forward affordable care act taxes plus penalties and interest. I personally hate this because there is no bright line rule as to what a reasonable salary is subjecting all business owners to the mercy of the IRS.
I am surprised this would happen to a YC company, not that YC is in anyway responsible, but I figured YC would be in a position to offer various business services (payroll, legal, tax, insurance, ect...) at extremely low cost. For example, I personally solicited YC and offered to provide Delaware incorporation/registered agent/annual compliance services to any YC companies at a discount which without the discount is already cheaper than legalzoom.
Re: Mistakes You Should Never Make
#76On the co-founder thing, being a "co-founder" doesn't mean you're also endowed with as much authority as all the othe co-founders. In most circumstances one of the co-founders should be designated as the one in charge, given the responsibility of making the hard decisions.
Being in charge doesn't mean you get to win every argument, as you don't want your co-founders to quit, but it definitely shouldn't be a thing where all the co-founders have equal decision making capabilities because that may lead to never-ending strife. Most decisions shouldn't be arbitrary anyway, a decision should come with a convincing argument. It's those hard decisions when none of the answers seem perfect where you need someone to win out even though it may not feel right.
The leadership structure should be determined when the founding team forms, so there's no ambiguity later and each person needs to decide then and there if they can live with the setup and thereafter stick to it.
Re: Mistakes You Should Never Make
#77Earlier quoted context omitted.
Screwing up your personal taxes in a consulting business is a debacle but also a rite of passage for consultants. It happens to everyone. Screwing up payroll tax withholding for employees is financial catastrophe. You've taken money from your employees on behalf of the government, but then kept it. Your liability in that case can be criminal, maybe even if you didn't deliberately defraud the government. So, those two…
> It happens to everyone. It happens to a lot of people but certainly not to everybody. As a rule of thumb in the first two years you simply want to reserve 50% of your gross until you get a better handle on what your deductibles are and what it is that you exactly owe and then you can slowly home in on the correct amount to reserve. Too many variables to get closer but 50% should cover all but the most extreme cases…
That's a good rule of thumb, but a better rule is probably to just get an accountant on day one. For 1099 consulting businesses, doing your own taxes is probably a false economy.
I think a lot of people assume they can put off getting an accountant until they're sure the business is serious. Which is probably why so many of the stories I've heard (and, to add to that, my own story) are about the tax screwup consequences of those first couple gigs you do before you formalize the company.
Re: Mistakes You Should Never Make
#78Mistake 1: Taxes This thing about not noticing that you weren't paying payroll taxes wasn't a "mistake." It was pure head-in-assery. How can you "miss" the fact that you weren't being subtracted for payroll taxes? One quarterly / annual review after another, for 3 years? It's like running a personal budget, and "missing" the fact that you aren't paying rent.
Founders get bombarded with many corporate taxes they are often unfamiliar with. As a founder, it's not inconceivable to think all the proper taxes are being paid when one slips through the cracks.
There are no excuses on payroll taxes. The tax authorities aren't fucking around about them.
Re: Mistakes You Should Never Make
#79Of all the financial mistakes you can possibly make running a company, withholding payroll taxes and then failing to remit them is probably the worst. Be thankful you caught this before the liability exceeded your available funds, because company operators are apparently routinely held personally liable when there's a shortfall, and I'm not sure that debt is even dischargeable in bankruptcy. What's worse, minor versi…
As a former transactional/commercial litigation attorney I too would see this issue regularly. One interesting "hack" I would see clients do regularly as owner/employees, they would minimize their own salary to avoid payroll taxes, maximizing their distributions (distributions are not subject to payroll taxes). Unfortunately for them the IRS accounts for this hack , and if an IRS audit finds the salary isn't reasonab…
It's a hack, and it's also unfair. S-corp company owners get to inhabit a very small part of the economy that, due to a loophole, gets a dial that turns some of their liquid compensation from "salary" to "investment income". That's baloney. I'm glad it's an audit flag.
Re: Mistakes You Should Never Make
#80I actually enjoyed this article and it's definitely reassuring in a way to read about other people's struggles. I have to take minor issue with the "entrepreneurs don’t talk about their most difficult moments publicly" part because it seems like there's an abundance of articles lately from founders who write about their stress, depression, failing startup, etc. I feel like I see more of these articles than success stories. Even the success stories I've seen lately are more of the tone "we had to really go through some shit to get here."
I do respect that it's difficult to write about, though. In addition to just wanting to not feel like a failure, you don't generally want your employees and investors to feel like everything is about to go down the toilet. I'm glad to see more people writing about their real, honest experiences.