Comment by pts101 | Hacker News Reader

Comment by pts101 | Hacker News Reader

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(replying to myself)

One point I'd make to up and coming entrepreneurs: taxes aren't going to be the burden you fear. When you're growing your company you'll pay relatively little personal or corporate income tax.

Personal income tax will be relatively low because most entrepreneurs would rather reinvest in their business than buy a $20,000 watch.

Corporate will be relatively low because you won't be sitting on the cash, you'll be hiring people, spending on infrastructure or advertising and otherwise growing the business. This means your annual profits will be tiny.

The vast majority of the value you accrue will be in the business itself, and you won't have to pay on those gains until you liquidate.

Frankly, I think these discussions are bad for HN not because it's a bad idea to discuss politics or economics, but because nearly everybody on this site would get more value from an article about marketing, productivity, coding, testing, launching products, or any other topic that can actually help an entrepreneur build their business, today.

>One point I'd make to up and coming entrepreneurs: taxes aren't going to be the burden you fear. When you're growing your company you'll pay relatively little personal or corporate income tax.

That's an extremely important point.

I tell people: If you want to help startups, the tax rate does not matter hardly at all. While you are still a 'starup' you will pay very little in taxes, just 'cause you will make very little money that is not re-invested. The tax complexity makes a huge difference, though. Now, I'm sane so I pay an expert to deal with that sort of thing, but a complex tax code is worse than the costs of paying another expert.

A complex tax code, first, massively increases my risk. I know two people who will likely be in debit for the rest of their lives because they tried to do their taxes themselves while running a business. Now, I've got a professional, but there is always a chance they will screw it up. I'm on the hook for the money, no matter what. I can get out of my building lease and loans through bankruptcy, but tax debit is forever.

Next, a complex tax code makes it harder for me to plan out how to allocate my resources. With a complex tax code, it's often more profitable to play accounting games than to actually build something people want more efficiently than the competition, and I think that impoverishes us all.

I can't agree more thoroughly.

It's obnoxiously difficult to identify all of the taxes (especially state and local) that are relevant to your business, let alone to actually file and pay them (both of which can be harder than you'd think.)

Until there's an easy way to verify you're compliant, I don't think there's any viable option except to hire an accounting firm to ensure compliance. If you use standard accounting software (like quickbooks) and just want them to deal with filing and paying the taxes, the bill will be small.

>If you use standard accounting software (like quickbooks) and just want them to deal with filing and paying the taxes, the bill will be small.

I make more use of the accountant than that.. It's almost like having an experienced business person on 'pay by the hour' basis. A typical contract accountant has worked with more businesses than your typical businessperson. I mean, the accountant is not much help on marketing, product development, etc... but as for the mechanics of running the office, payroll, insurance, keeping the government officials besides the taxman at bay, etc... an accountant can be really, really useful, especially when you just want to know "how do other businesses solve this problem?"

I use more than that as well, and you're right. My life got simpler when I switched to a regional accounting firm that specialized in smaller businesses.

I was simply trying to note that tax compliance is cheap enough that there's really no reason not to do it.

(Total nitpick that I wasn't initially going to post, but it's now appeared in several of your posts and it's driving me crazy: you're using "debit" where I think you mean "debt". A debit is an accounting entry indicating something has been deducted from an account; it's basically part of an income statement, reflecting a one-time payment. A debt is money that's owed to someone else; it's part of a balance sheet, and is permanent until paid back.

Confusion is somewhat understandable when you consider that the opposite for both is "credit". When used with an article ("a credit"), it's the opposite of debit, a one-time addition to an account. When used without an article ("banks extend credit to borrowers"), it's the opposite of debt, a sum that is owed to you by other parties. English is a funny language.)

you are correct, of course, it's a mistake I make often. It's funny, I think mistakes that are not made obvious by the spell check actually make you look dumber than mistakes that would have been caught by the spell check.

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