Ask YC: Do I need to have breadth on accounting and laws?

[log0]

Hi all,

I frequent here reading. I really value the opinions here, hence here I have questions that I felt best to post here.

1. Do I need to get some breadth about bookkeeping, accounting things myself? If yes, where can I get such resources if I decide to self-learn?

2. Do I need to get some breadth laws regarding startups? If yes, where can I get such resources if I decide to self-learn?

3. Do you do the bookkeeping (money) records yourself or hire somebody to do it?

I have completely no idea and am just reading business books. I am trying to get more sense and prepare myself some sort. Thanks a lot all!

Update : I'm China based.

[ErrantX]

I assume you are US based? In the UK there are govt agencies called "business link" which will gve you free advice on startups and getting your business off the ground. They can give you quite a bit of info related to laws and accounting. I assume that in the US there are similar initiatives (though you might have to pay).

As to employing someone?

I'd say it comes down to how much admin time you want to spend on the company - or rather how much you can spare. If you find yourself becoming too much of a manager and lose the ability to drive the project forward (IMO essential in the opening stages of a startup) then it might actually be more beneficial to employ someone.

Plus of course if you can employ someone experienced for 18 months then that is 18 months where you get to see how it is done and pick up tips & tricks from them. (after which it might then be economical to do it yourself).

I have been quite lucky. My father has run his own firm for a number of years - which is quite small (so he does all the admin). As a result he knows a lot about the books, accounting and legal aspects (if only on a small scale). In the end I decided to go with an accountant - but only because I have a friend qualified from university who is doing it on the cheap :) (if you don't know anyone like that then go befriend them! :D)

[bigthboy]

Under standard circumstances, it's always important to understand where the money is going and how it gets there :). Whether or not its your job to constantly track it at every stop and all the related tasks is a different situation. Generally, I feel its important that you know your basic accounting and bookkeeping and be able to understand it to a sense that you can do it during the early stages. Once you're founded, in the US, you do have financial and tax responsibilities that you have to be aware of and you likely don't have the money to pay an accountant to do it. Once you grow a little bit and have the money to spend on a professional accountant, if you're not really good at it (and even if you are) its generally best you get someone to do that for you, just follow along with everything that's going on.

However, being you're in China I'm not even going to step in advising you on how to go about your country's laws and financial regulations because I just don't know. China is its own animal and can't easily be dropped into the cookie-cutter systems of the US and UK. In my opinion and very limited experience that is, anyways.

[log0]

I see. If I am to start, what would be common ways for self-learners? And yes you are right, I don't think I am financed to pay an accountant at early stage yet. Well... it's all just thinking right now. =)

I understand the systems in China will be quite different, hence I am only asking for general advice.

[bigthboy]

For me, I learned by obsvering my mother who owns a small retail shop and how she did accounting. I also took a course at my high school.

I've not really done much of online accounting research so I don't know where would be the best place to point you. However, some of the major accounting programs are rather simplistic to use and can, usually, step you through it.

The most important thing early on is to just keep a good record of who you owe, how much, and why. If you don't have any employees that are paid yet you really don't have much to worry about. Simple budgeting should get you through.

When you start selling things and start having employees is when it starts to get complicated. Other than that just keep a record of what you bought from who and how much it cost.

I AM NOT A CERTIFIED ACCOUNTANT AND MY ADVICE SHOULD NOT BE TAKEN AS THAT OF A PROFESSIONAL. I AM RELAYING INFORMATION BASED ON MY OWN EXPERIENCES.

[log0]

Yes. Thanks a lot. I will think about it.

And don't worry, I will digest the information and decide myself, and not just directly dupe it into my brain. Thanks a lot. =)

[log0]

>>ErrantX

I am China-based. I assume I do not have a friend that can do the work, and after all it seems a friend who will do cheap is very likely a close friend, right?

That is great that your father is someone who has experience. I am walking my own path. Do you have any titles to recommend?

I do not know if I will get bored of those manager things, and I have never did it before. But then, I felt there is a need to do it sooner or later, if we are to start anything.

>>Ram1024

I am trying to storm things out with a friend of mine. We are both developers. No actual things coming out yet, but I believe if both of us are not having ideas of how these things work, there's going to be a pain afterwards. I just want to get some breadth in advance.

You are right, think it loud.

One of the questions we are troubled at is : if we failed and decided to shutdown the startup we are trying, what if an agreement of 1 year payment is signed, how can we get rid of liabilities and not be sued?

--- Please pardon my unclear questioning as I am still not familiar with the details of how things work. Thanks.

[ErrantX]

Hey,

Well my personal circumstances are by the by: they were an example :D My point was really more that you should try to talk to people with experience (face to face, not just here). A half hr to an hr conversation will probably get quite a lot of stuff straight.

Considering your situation it's a bit hard to give advice. Do you actually have a product to bring to market? Are you at a stage where you a) need funding or b) can begin to sell. With my startup I worked with a team of friends for about 2 years before we formed the actual company. We all had day jobs or university and so we worked in our downtime bringing our idea into fruition. Now we have an almost marketable product and are at the stage where funding is essential: so recently we took the step of forming the company and searching for funding.Until now it was an unecessary need.

If your not selling or bringing in cash for funds then I would advise avoiding forming any legal entity. The only thing I would say is that it might be worth signing some kind of partnership agreement between you and your friend. I'm sure things will be fine but if you fall out (it's so easy) it is best to know exactly where you stand in terms of what individually you can take away (ideas, code, etc.).

As to the final part of that post - regarding getting out if the startup fails. That is incredibly country specific. You will need to get some advice: either from a lawyer or from a public body (if they exist) as to your exact options.

In the UK you could, for example form a Limited Liability Partnership (where if things folded you only have a small personal liability) or an full on LTD company (where there is no personal liability). I assume similar entities can be formed in China (though I DONT KNOW).

I think the best advice is to hunt for someone locally who can tell you your options in that case.

If your entering into contracts with other companies at this stage (note not just selling - actual contracted agreements) then you DEFINITELY need to consult professionally. It shouldn't be too expensive and is worth it. If your obtaining funding and are presented a contract ALWAYS ALWAYS ALWAYS take it to a lawyer before signing. :)

Good luck!

[ErrantX]

One other point is how you plan to account as well. If you want to do it yourself you'll either have to put together your own system (that is EASY to use - trust me that is essential) or invest in a commercial package. That can be expensive - so it might be cheaper to seek professional services.

If iti s only a small company you might be ok just keeping a general book (income, outlay, expenditure etc etc.) and keep all receipts. Then at the end of the financial year take all that to an accountant and pay him to get it all written up and submitted. That is how it works in the UK (and probably costs around £400-500 depending on the amount of work involved) - I dont know if that is the case in China but it is worth investigating. Usually there is no formal requirement for a small startup to keep regulated books - just to have some form of accounts the tax man can request at any time (it;s more complex than that but, meh, essentially all that ya need to know :P)

[ram1024]

i personally would not plan ahead for failure (heh) but i guess if you wanted to cover all bases, you can probably sign up for services under your company's name or dba and would not technically be liable for terminated accounts if the business failed.

definately need a lawyer type to clarify this one though, it is not my milieu

[log0]

Well, hehehehe I know what you mean. But I am just trying to get a sense of things, it's always better to protect yourself in case. You know, these things I've heard can really cause a financial ruin to one's life.

[cbrinker]

I think you should ask the question, "Hey, should I know where my money is and will I get sued?"

If those two points are relatively important to you, I would imagine spending a little time understanding them.

1. You should at least know the basics, how accounts work and how to balance the books. Quarterly and fiscal reports are good to know so you can tell where your business is at. Wikipedia.

2. You will probably need to know about contract and IP law most in the tech business world these days. Wikipedia.

3. Yes, I use quickbooks. It's so easy to use that it has somewhat dumbed down my understanding of accounting that I formally studied last year. Learn accounting first.

Law is a huge deal. Maybe start off at Jurisprudence? :] I have formally and vocationally studied many topics of law (I hope I don't switch from IT/Coder to lawyer >.<) and it's a relatively abstract and complex subject. Basically, learn the basics about contract and IP law, then just work in good faith. The courts like people and businesses that work in good faith.

[3pt14159]

It also depends on your business model. If you are going to be invoicing clients/tracking time you should check out something like freshbooks.com it will really cut down on wasted time and improve organization. If your company is ad-driven, email your favorite websites and tell them that you are new, but love them and that you would like to put up an ad for them for $5 a month or something. 2 out of 3 times they will happily do it.

[ram1024]

well it would probably help paint a clearer picture of what you need if you explain to us what you're trying to do.

like for example:

"i am a coder, i am making so-and-so product (can be vague if you're worried someone might steal your idea) for this field. i am currently partnered with someone who does design and marketing right now and we're looking to start full time work on this company in 2 months, what resources or skillsets should i be researching?"

i get the feeling that even by fleshing this out you'll realize some of the things you might need to look into.

let us know :D