The most important thing, get an accountant right away. Ask the accountant if they can/want to handle payroll for just the founders for now. Gusto is great but there is a cost, and sometimes it is more than the accountant just issuing payroll for you (when it is just say 2 founders or so). I had an accountant that did the founder payroll within their monthly fee for managing our books (up to 4 people actually). This made it cheaper and easier. Some banks also now offer this service for a small fee.
Yes many tax exemptions exist, get an accountant. A lot of founders I know have "lived" in their offices. Essentially they had the company rent a house to work from and they "lived" there eliminating their rent. This is technically taxable to the founders but can be creatively handled and deferred till you have some more money (at least to a certain degree).
Also, you didn't ask and probably know, but take the lowest amount in salary you can, minimum wage ideally. If you have more obligations then take more, but try to keep it to the lowest dollar amount possible. It is something your next round of investors will pay attention to.
I was thinking of doing that too with the rent, but a lot of comments online suggest the IRS doesnt rly like that.
Yes, I am only going to pay myself minimum wage so I can cover living costs. It should be about $2.5K here near NYC, might actually move somewhere cheaper say Florida or Austin or smth.
You started a Delaware C corp which means you also have foreign registration fees, business licenses, insurance and things to take care of for your local state. You'd probably be smart to get out of NYC just from a cost perspective although I also understand the desire & benefits it can have. In Florida (that's where I am) or Texas (also lived there), your dollar will stretch further in rents and business licensing is significantly cheaper etc.
The IRS doesn't like the rent thing if you do it improperly, or don't manage the tax implications correctly, they don't care otherwise. They just consider it a benefit which is fine, just needs to be accounted for and reported properly. Use an accountant they will help you set this up to the best of the business and you.
Which is the parent entity? The US one or the Europe based one? Depending where the investment was banked it will also affect your tax issue. Like it or not you will have a more complex tax situation regardless because of the two linked entities and moving money around is simple but has ramifications you need help with.
You can get a small business/startup type accounting firm for ~$2-3k/year at first if all they are doing is quarterly bookings/taxes etc, some will toss in the payroll for 1-2 people at that. Even if you only raised 30k, spend the 3k on an accountant over the next year or you could wind up with a major tax burden or miss out on R&D credits which can help you in the future too etc.
* edit to add this: I'm not trying to sound negative or scare you. Just want to pass along information I have learned and been taught as well. My biggest lesson, being a successful founder means you need to build your advisors team from day 1.
Thanks for the info though! Much appreciated! Where in Florida are you based? I was looking for moving to Austin or Miami or Jacksonville actually
Jacksonville is a good option, still inexpensive overall, decent city life & start up scene, easy to find employees and has good investors. Miami is also awesome, little better weather IMO cause I hate temps below 40, but cost is a little higher; still low compared to most major cities however. Austin is also a great place, lived there when I was in Texas, though it has changed a bit since I was there, still is a cool place with a great balance across things. Both states are income tax free which is always nice too.
There are services you can use, like waveapps, or Quickbooks. You use their accounting software and they have certified accountants that will help you every quarter/year with taxes etc. They both offer payroll services for a small fee too. Difference is they aren't your tax advisors, they just will do what you ask and they aren't necessarily looking out for you the way a private accountant would who gets to know your business. I've used both, but still hired an independent accountant to make sure I didn't totally ball things up.
C-corps are not for amateurs.
They are not do it yourself.
It is less common now, but AskHN's about large tax bills from Delaware used to be a fairly regular feature.
All that before considering all the footgun potential in having a founder in Europe with a separate entity.
If you can't afford an accountant, you don't really have a business.
Talk to an accountant about taxes. In short, the company will have its own taxes and you will have yours.
Look into the 83b election to see if you can still do that, depends on when you got your shares originally
They do so much for that, the time savings pays it back.