throwaway150919

For a long while my partner in our business has done the books himself. We avoided using a bookkeeper and accountant, engaging with them often when it was too late. We found that we often were not paying the correct corporate taxes, payroll taxes, etc.

We have since migrated to using a payroll service, and are now using "XXX" as an accounting company.

I get the sense that they are drip pricing us.

Accounting services often seem like there are endless fees, and endless work that needs to be done. We keep getting bills for additional fees, and additional taxes (city, state, federal) that we were not aware of. I know this is probably somewhat par for the course, but it is now verging on the tens of thousands of dollars and has had a real impact on our ability to make payroll.

For example, this statement makes me very suspicious: "we need to fix the 20xx tax return; not all expenses are in the 20xx return."

Would an internal accountant really recommend amending a return when a few expenses were not fully included? Would this really trigger an audit? We are talking about a few hundred, perhaps a thousand dollars for revenues of $300k.

Does anyone have a good startup accounting firm they use and like? Or, recommendations on what is a good process? Use a bookkeeper once a month, then hire an accountant once a year? Are there flat rate pricing services where you do the work through a web UI rather than dozens of emails, etc? Are there payroll companies that offer this as an add-on?

Or, is this just the reality of making sure the books are clean?

It really feels like this is a clever company milking us because we are ignorant. But, I'm not sure.

My friend is a highly connected AND very technical salesperson. A year ago he approached me with a radical idea: there is a sea change happening in his industry that will force companies to abandon existing software infrastructure, and he had an idea that addresses this sea change in a way that does not force his customers to make billion dollar reinvestments in their networks and handles with a new suite of software instead.

I was working as a consultant and setup a company (using Stripe) and for the last year have been building the software. We are close to having several large banking customers do paid trials.The software works and is radically different than anything else out there, but it fits easily into existing solutions and the sales cycle is not alien.

My friend works for another company in the same industry. When he first had this idea, he told them about it, and they declined to act on it. He has this documented, by the way. It would have cannibalized their opportunities as a reseller of technologies that compete with this new offering.

I've taken zero investment up to this point. There is also no revenue yet.

My questions are:

1. He will leave his current employer soon. How do I let him buy into the company and purchase a large equity stake (for very little cash) without drawing the ire of the IRS if there is a later large sale?

2. He has some debt, so one thing he would like to do (and I'm 100% on board about) is letting him purchase stock at a very reduced rate now. Then, when we prove the opportunity and several of these banks do paid trials for $50k or so, the company buys back some of the stock from him (at a very different rate). This obviously establishes a very different valuation for the company, and allows him to reduce his personal debt.

Are there better ways to do this? If I offered him a position on the team (as a C-level executive), could I grant him a large equity stake (say 25%)?