Lean means efficient not alone

Lean startup entrepreneurs must weigh the cost of doing everything themselves.

Today, if you were required to submit U.S. tax documentation for five employees you’ve hired over the year, would you know how? Would you feel confident an external audit would find no mistakes? Chances are, probably not. The effort it would take an entrepreneur to adequately understand and comply by the U.S. tax codes, the much less the regulations for employee wages, could be compared to a four-year accounting degree. For this reason, an entrepreneur must decide whether the value and integrity of his business requires his direct hand in tax preparation or whether his time is better spent creating and selling the business' product.

An entrepreneur has a limited runway to launch a viable, profitable business before he runs out of resources. To keep costs minimal, he’s likely to do every business-related activity himself. But when he gain a measure of success, enough to hire his first employee but before his business has regular profit, he may be tempted to continue to do all activities himself. Two, three, then five employees later, and the entrepreneur is spending the majority of his time keeping the startup’s books in order instead of discovering a viable business model and selling his business. If he doesn’t give these responsibilities to another, whether a new hire or an outside service, he’s likely to stall his business as he learns details, such as the intricacies of the tax code, that have no direct influence on the success of his venture. Yet, if he decides to take a third route, to put minimal effort into tax preparation and get no outside help, he may find his business dismantled by the repercussions of his mistakes. The savings he gained from cutting corners may be lost in an audit.

Tax preparation is dry and overly-complex material. When my roommates and I started an LLC, we were able to submit our own taxes, with some help from the BBB, because we had no income. If our business had begun to profit (it never did) we would have soon been overwhelmed by the intricacies of the U.S. tax regulations. While our circumstances were simple enough to make a public accountant an excessive expense, I would strongly recommend that an entrenpreneur connect with a public accountant to assist with the process and to transition the work to once the number of employees grow ((Fleischer)).

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