Startup, also spelled Start-up, is a catch all phrase for new small businesses focused on rapid growth. While there is not a specific legal definition of a startup, they are often in areas of technology and focused on leveraging a new opportunity to grow the business rapidly for a large return to their investors.
While startups are a form of entrepreneurship, they are dramatically less common than other forms of small business. Often organized as traditional C-Corporations, startup companies may not be profitable for many years, some may not even look for revenue in the beginning.
While most small businesses are funded by the personal savings of their owners, start-up businesses are often funded with venture capital or angel investment. These investments are based on rapid growth and expansion of equity value, instead of profits and dividends, making valuation challenging by the needs for proper economic and financial systems tricky. Very few accounting firms are equipped for these specialized ventures, because the companies are small in terms of revenue, but need to have real corporate financials because of the need to report to their financial backers.
Bette’s first startup accounting job was in 2000, while still an undergraduate student at the Massachusetts Institute of Technology (MIT), am we have helped angel and venture capital backed startup companies in the New York, Boston, San Francisco, and Miami areas.
Areas of interest for startup companies includes the elections related to the tax treatment of stock options, understanding and maximizing the Research and Development Tax Credit, and understanding managing basis for preserving the ability to utilize business losses. Accounting firms that focus on large companies are familiar with the GAAP Reporting needs but not the startup specific areas, while local accounting firms are mostly equipment for owner-operated pass through entities and will struggle in these specialized areas.