CEO Cost Amicus $500k
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Just the idea of trying to operate as a director/partner at a startup without an accountant gives me the willies. It's mindboggling to think people actually wing it past the point where they're making payroll.
1) Don't roll your own crypto;
2) Don't maintain your own SMTP server; and..
3) Don't do your own payroll.
There are LOTS of things you can try to do yourself as an entrepreneur (some are easier than others), but I think this is a handy list. It boils down to risk vs. cost. The cost of outsourcing the three of these is relatively small -- the cost of screwing any one of them up is massive.
He is a prolific poster on HN, whose comments and articles often have pretty good insights.
Yet every time I read about his history, I just ask, why? So many of his choices and risks seem so reckless. Is he truly foolish? Or are we the beneficiaries of hindsight, of stress free decision making, ungrounded in the day-to-day reality of running Amicus?
I think the latter is closer to the truth. Meeting him in real life, I realized he was just as sharp in person as on paper. (Also very good at Catan. Damn you Seth.)
And talking with Seth was one of the conversations that helped me to get started on my business, which should break $200K in sales this year.
From what I know about his current startup investments, I think the headlines will be a lot kinder to him in the years to come.
Seth has ample ambition, and when someone with ambition finds an opportunity they want, but lack the credentials for, they'll fight for it regardless. Seth's mistake was thinking others were the same.
For those that don't know, as a first time founder and CEO I made a large number of mistakes I wish I hadn't. In retrospect, they seem bone headed but none of it was clear at the time. I wrote about those mistakes so others might avoid making them [1]. Unfortunately that blog post has been turned into a couple takedown pieces at my expense. Such is life.
I'm on startup #8 and I've learned something at all the prior jobs and startups to do and not to do.
Experience is sometimes learned the hard way, being a hardheaded person myself, this is my preferred course :-)
I don't know if there is a way to get up to date info, but you can at least catch it after year end. And if you do find a dependency, bringing it up early to your employer could end up saving them too.
I wish i had been more careful to start with.
I have experienced both !
Ok, so how much of that was just back taxes? They would have had to pay those anyway, so you can't really count those the same as a penalty.
$500,000 - (back taxes) = actual losses due to negligence.
Now compare the actual losses to the salary for a CFO. If the CFO cost more than the losses, Amicus still came out ahead.
I am not advocating for negligence, but you should always look for point of view bias in articles like this.
The charts toward the start suggest the penalty maximums are 15% + 25% (the article mentions a 100% penalty which was avoided).
That would make 500k 140% of the back taxes, which means the penalties are only $143k.
Crunchbase shows the first funding in Feb 2012. The accountant started in 2014. That's under $72k/year.
"Lack of CFO costs Amicus $72k/year" wouldn't be much of a headline, though.
I am not following: if he was the only person running the company, how did payroll taxes get so large ? Was it for his own pay? The article neglects what the taxes are for which would have been helpful.
The article is just content marketing, sensationalizing a mistake made by an extremely small, early stage startup as a marketing ploy to lead you to the conclusion you should buy this company's software to avoid a similar fate. So not surprising it's light on details. For what it's worth, startups at that stage almost never have a CFO nor any admin/accounting staff. That said, obviously it was a mistake and they should have paid their payroll taxes. But the sentiment in this piece is crafted solely to lead the reader to the conclusion that they should pay for this company's software.
I really don't think it's possible for there to be too many articles telling startup founders not to fuck up payroll withholding. It's that important.
Down here in New Zealand, for instance, it's quite reasonable to manage payroll for a smallish company yourself. There are some services/tools which people seem to like too.
In the case of an employee without student loans nor child support payments: once a month, the employer submits some information and pays tax to IRD, usually online. Inputs are the employee's gross income, their IRD number, and the contribution rate to their KiwiSaver (retirement plan). Outputs are effectively four numbers: pay the employee $A, send the IRD $B, and then the company needs to record two other amounts which relate to KiwiSaver. Manually dealing with the last two bits may even be obsolete - there's a new process available now, but I haven't switched to it yet.
This online calculator shows most of the work required https://www.ird.govt.nz/calculators/keyword/kiwisaver/calcul...
Income tax is also quite easy from the employee's perspective: decide how much to contribute to KiwiSaver (usually when you start the job), do your work, and receive your pay. There's no annual tax return to file for most people, as the right amount of money shows up in the right places.
Better still would be to call up any random bookkeeper from the local area. Payroll is ridiculously easy for those who know how to do it and is well within the competency of even a bad bookkeeper.
Just remember to always sign all the checks, no matter how small, and look at the bank statements every month. It'll take maybe 20 minutes a week and saves so much hassle and money later.
Any idiot can google this stuff and find out exactly what he needs to do within an hour.
The takeaway should be that if it is not your forte, outsource to an expert or spend a lot of time on it to make sure you get it right.
I'm going with incompetence.
This problem is also probably why YC funded companies like Gusto, so founders can outsource that part of running a startup.
But there were other options out there. At my first company i set up Paychex. And while terrible to maintain, did all the withholding/payroll for us.
I'm one to talk because I made the same mistake, thinking I could do it all with quickbooks. Three anxiety filled years later I wised up and got a bookkeeper (in addition to my accountant) .
How did nobody balance the books at all in 3 years? He states: "... I thought, Bank of America’s payroll system automatically withholds payroll taxes every month, it’s all automated. But it wasn’t. There was a single “submit tax” button in a separate part of the Bank of America website that had to be clicked to actually pay the taxes."[0]
Any even semi-competent bookkeper would have noticed this.