“Quasi-California” Corporations Made Subject to California’s Corporate Laws

Even if your business is an out-of-state corporation, if it fits the profile of a “quasi-California” corporation then it is subject to specified provisions of California Corporations Code. Your Company is a “quasi-California” corporation if (1) more than half its business (based upon a three-factor formula including property, payroll, and sales) is done in California (the “doing-business” test); and, (2) more than half of its voting securities are held of record by persons having addresses within the state of California (the “voting-shares” test). Stubbs Alderton & Markiles, LLP, wrote a good post on the specifics of quasi-California corporations. Read more here.

Women Founders Network Annual Fast Pitch

On October 21, 2016, Women Founders Network hosted its annual fast pitch competition at Cross Campus in Downtown LA. Square Root Financial was honored to be a pitch coach for the third year in a row.

It was an impressive roster of companies who presented. The top 10 included: GATE college system, Kitterly, Tot Squad, Genneve, Markett, EmoJam, NailSnaps, CityMoms, Verde Circle and WeReach. It was a tough competition but the winner was Genneve, a natural lubricant for women. The winner was awarded $30K plus $50K in in-kind services. Congratulations to Genneve and all of the other top 10 finalists!

SRF & Silicon Beach at the University of Southern California

SRF’s Managing Director, Mackenzie Chambers, is honored to be an advisor to Silicon Beach at the University of Southern California (Silicon Beach @ USC). Now in its 5th year, the Silicon Beach @USC conference will feature game-changers and thought leaders from Hollywood studios, enterprise technology and service providers, LA-area startups, and more. Scheduled for October 14th on the USC Campus, the sessions will focus on the unique synergy of innovation, creativity, entrepreneurial thinking and technology that is driving the startup ecosystem and that continues to disrupt almost every major industry.The conference will explore:

  • How Acquisitions are Driving Innovation in the Enterprise – and what this means for entrepreneurs and investors.
  • Tech Platforms, ROI, & Leadership – Exploring the business case for adopting new technology platforms and services, and how technology leaders can reap maximum value from their investments in new initiatives.
  • The future of entertainment – The trends that will have the biggest impact in 2020 and beyond. (AR/VR, multi-platform, OTT, digital advertising, etc.)
  • Reaching the 21st Century Consumer – The future innovations in marketing that will take us beyond ad blocking and build authentic and sustainable relationships with customers.
  • Storytelling, World-building & the Business Of Fun: Gaming & Interactive Entertainment.

Speakers Include:

  • Jon Kraft, co-founder, Pandora
  • Ted Ross, ‎General Manager, CIO at City of Los Angeles
  • Sean Kundu, Vice President, New Ventures at San Francisco 49ers
  • Matt Crowley, author, Winning the Game: How to Successfully Sell Your Business
  • Andrew Stalbow, CEO & Co-Founder, Seriously
  • David Ring, founder, David Ring Media and former Executive VP, Universal Music Group
  • Gordon Bellamy, Visiting Scholar, USC School of Cinematic Arts & Advisor, TheWaveVR

Click here to register for the conference: http://bit.ly/2dlhfag

Business Accounting Basics Seminar Recap

Thanks to the Bixel Exchange for the coverage on our August 23rd “Business Accounting Basics” seminar in partnership with the LA Law Library.

“Every business decision must be made with an eye toward the bottom line. How else would you keep your doors open, otherwise? The LA Law Library workshop with Bixel advisor and accounting expert Mackenzie Chambers of Square Root Financial helped navigate more than 20 entrepreneurs through accounting essentials, including fundamentals of financial modeling, the importance of cash flow, and key financial statements that provide an insightful look into the health of your company.”

If you have business accounting questions, feel free to reach out to us at accounting@squarerootfinancial.com

Important 2016/2017 Tax Dates

Taxes always seem to sneak up on us. Before you miss a deadline, put these key tax dates in your 2016/2017 calendar. If you need help meeting these deadlines or need any tax planning advice, feel free to reach out to us at: accounting@squarerootfinancial.com.

Note: in 2017 the traditional due dates for partnerships and C Corporations changed. See below.* Also, please note tax deadlines never fall on a federal holiday or a weekend. If the normal due date is on one of those dates then the actual due date will be the following business day. Happy Tax Planning!

SEPTEMBER 15th, 2016

  • 3rd quarter estimated tax payments due for the 2016 tax year
  • Final deadline to file corporate tax returns for the year 2015 if an extension was requested
  • Final deadline to file partnership tax returns for the year 2015 if an extension was requested

OCTOBER 1st, 2016

  • Deadline for self-employed persons or small employers to establish a SIMPLE-IRA for the year 2016

OCTOBER 17th, 2016

  • Final deadline to file individual tax returns for the year 2015
  • Final deadline to fund a SEP-IRA or solo 401(k) for tax year 2015 if you requested an automatic extension of time to file

DECEMBER 1st, 2016

  • If you are covered by an HSA-compatible health insurance policy as of December 1st, you’ll be eligible to contribute to a Health Savings Account for the year

DECEMBER 31st, 2016

  • Last day to make any tax moves for the year 2016. Last day to set up a solo 401(k) for self-employed persons
  • Marital status on this date determines your marital status for the whole year

JANUARY 17TH, 2017

  • 4th quarter estimated tax payments due for the 2016 tax year

MARCH 15th, 2017

  • Partnership Return Due*
  • S Corporation Return Due

APRIL 18TH, 2017

  • Deadline to file individual tax returns for the year 2016 or to request an Automatic Extension. An extension provides an extra six months to file your return. Payment of the tax is still due by April 18th. You can submit payment for tax along with the extension form
  • C Corporation Return Due*
  • Last day to make a contribution to traditional IRA, Roth IRA, Health Savings Account, SEP-IRA or solo 401(k) for the 2016 tax year. (If you get an extension, you will have until October 15th to fund a SEP-IRA or solo 401(k))
  • 1st quarter estimated tax payments due for the 2017 tax year

JUNE 15th, 2017

  • 2nd quarter estimated tax payments due for the 2017 tax year
  • Deadline for US citizens living abroad to file individual tax returns and to pay any tax due. You can request an additional 4-month extension

SEPTEMBER 15, 2017

  • Final deadline to file partnership and C Corporation returns for the year 2016
  • 3rd quarter estimated tax payments due for the 2017 tax year

OCTOBER 16, 2017

  • Final deadline to file individual tax returns for the year 2016

Independent Contractor vs Employee

As companies get started, they often delay hiring employees and instead use independent contractors. After all, once a contractor becomes an employee, the Company is now responsible for payroll taxes: federal income tax withholding; Social Security and Medicare (together, Federal Insurance Contributions Act (FICA)); and Federal Unemployment, not to mention new liabilities under the Patient Protection and Affordable Care Act (PPACA). Here are the general guidelines from the IRS:

  1. Behavioral: Does the company control or have the right to control what the worker does and how the worker does his or her job?
  2. Financial: Are the business aspects of the worker’s job controlled by the payer? (these include things like how worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.)
  3. Type of Relationship: Are there written contracts or employee type benefits (i.e. pension plan, insurance, vacation pay, etc.)?

If you answer no to the questions above, you’re likely fine keeping the individual as an independent contractor. However, I recommend speaking with your accountant to get specific advice.

The IRS Finds Pokémon Go

Over the past week, I’ve been watching my friends & colleagues chase little animated creatures around town, narrowly avoiding walls and cars. For those who don’t know how it works, players use Pokémon Go’s geo-location feature and their phone cameras to find virtual Pokémon in their area in real time and receive points. It’s amazing how Pokémon Go & augmented reality has become a “thing” in such a short period of time. As with many “things”, the IRS has decided to weigh in.

“If you receive more income from the virtual world than you spend, you may be required to report the gain as taxable income…when you spend more in a virtual world than you receive, you generally cannot claim a loss on an income tax return.”

Not exchanging cash? Swaps of goods for services or barter deals are taxable (unless it’s a like-kind exchange or for partnership and corporate formations). While it is taxable, a non-cash deal is harder for the IRS to find. I recommend consulting with your tax advisor. Now enough of this tax talk, time to get back to the game.

Business Accounting Basics Course

Square Root Financial is partnering with the LA Law Library and the Bixel Exchange to teach Business Accounting Basics to entrepreneurs. The course will cover:

  • Basic accounting terminology
  • Understanding key financial statements like income statement, balance sheet, and cash flow statement
  • Fundamentals of financial modeling

When: Tuesday, August 23rd, 12-2PM

Where: LA Law Library, 301 W. 1st Street Los Angeles CA 90012

For more information or to register please visit: http://bit.ly/296oDJl

Hope you can join us!

 

How does a company with significant revenue, run out of cash?

A few years ago I met with a new client who had raised several rounds of funding and had significant revenue (if you were looking at from an accrual method of accounting perspective). When I asked what the bank balance was, I realized we had a problem. In fact, it was going to be difficult for them to even make payroll the next month.

You see, the company was selling goods to its customers with credit cards but not collecting the cash from the credit card companies for months later. You can’t make payroll today with cash you will receive in three months even if the revenue is earned today.

Accrual accounting recognizes transactions when they occur regardless of when the cash is exchanged. Cash accounting, on the other hand, recognizes transactions only when there is an exchange of cash.
As your company is getting up and running it’s critical to look at your books from a cash flow perspective.