A Checklist For Your Startup
Lisa Johnson, Director of Tax, FintechForce
Another year is coming to a close! It’s a good time to take stock of your company’s past 12 months and get your ducks in a row for 2024. Year-end reporting is always more involved due to annual filing requirements. Businesses must look at financial “housekeeping” every month, but the end of the year demands a closer look at the financial reports and performance assessments before diving into a new year.
All U.S. entities are required to report worldwide transactions which include those conducted in digital currency and through foreign accounts. Neglecting to report these can result in substantial penalties, so here are some highlights of the transaction reporting requirements to stay compliant in the coming year.
Tax information returns for the calendar year are due to recipients by January 31st, 2024. Forms 1099 for Nonemployee compensation and other Miscellaneous Payments are due if a business pays at least $600 to a U.S. recipient for services or events other than sales of tangible assets. A best practice to comply with this requirement is to ensure that all recipient information including name, address, and tax identification numbers are up to date in your files before the reports are due. Form W-9, Request for Taxpayer Identification Number and Certification, is used to request this information from vendors throughout the year.
The U.S. government attempts to keep companies honest about worldwide transactions by requiring any U.S. individual or entity who has financial interest in accounts outside of U.S. borders to report information via the Foreign Bank and Financial Accounts Report (FBAR). This report is required for entities with accounts of an aggregate balance of $10,000 at any time during the calendar year. The report is due by April 15th and must be submitted electronically through the FinCen system. Filing late or not at all is subject to civil and/or criminal penalties. It is important to note that if an individual has signature authority over a business account outside of the U.S., both the individual and the business must file this annual report.
Additional Year-End Reporting For Corporations
Corporations have additional filing requirements for information returns when specific stock transactions occur with U.S. employees. When an employee exercises an Incentive Stock Option, Form 3921 is due to the recipient and to the IRS. When an employee becomes owner of an Employee Stock Purchase Plan, Form 3922 must be filed and delivered to recipients by January 31st. The sooner this is handled, the sooner you can go from looking back to looking ahead.
Any business who accepts physical cash payments over $10,000 has an important filing which is due year round. The Report of Cash Payments Over $10,000 (Form 8300) is filed electronically through the FinCen system within 15 days of receiving these funds in a single cash payment or a series of related payments by a trade or business. The business must also provide a statement to each party included on a report during the calendar year by January 31st of the following year. Beginning January 1st, 2024, this requirement is extended to include virtual currency transactions.
These are just some of the things to keep in mind as you wrap up 2023. As the end of the year approaches, it’s natural to reflect upon how far you’ve come and look at where you’re headed. Whether you’re handling matters yourself or reaching out for assistance, getting your year-end financials and reporting ready now for the new year deadlines will put you one step closer to starting 2024 on a high note.
FINTECH FUNDRAISING NOW: AN INVESTOR PERSPECTIVE
A Fireside Chat
Ryan Gilbert, Founder and General Partner of Launchpad Capital
Dan Rogers, CEO of FintechForce
We’re in the middle of the fall fundraising season and it’s hard to raise a round right now. More than ever, investors are looking for great entrepreneurs and businesses that match their model, versus the bubbly market of 2021. We’re taking the time to talk with Ryan Gilbert, General Partner at Launchpad Capital, to understand the market and what makes a winning deal right now.
Ryan, thanks for taking the time today to share your thoughts on the current investment landscape and how founders can score a term sheet in this environment.
- DR: Is anything hot right now? What types of deals is the venture community competing over right now?
RG: Compliance and security are in focus. Global and domestic risks are forcing enterprises to ask tough questions about their blind spots, and they are investing in defenses to ensure the sustainability of their businesses.
- DR: What segments do you think are interesting in Fintech or the broader market? Does this list change or evolve over time?
RG: Banks and credit unions are under tremendous pressure to grow and retain deposits while complying with a myriad of regulatory requirements, maintaining tight security, and keeping existing customers happy. That’s a lot! Innovative technology solutions hold the key to better banking. We’re excited to focus on this huge slice of the technology landscape.
- DR: Do you see AI in Fintech as a real opportunity? Is it overpriced already?
RG: AI is already driving huge efficiencies in businesses of all sizes. It’s remarkable to see AI’s rapid impact in content creation, finance data analysis and customer service and we expect many more sectors to be positively impacted soon. It’s important to remember that AI wins are not the result of recent venture bets; the leaders were established years back. OpenAI is an 8-year-old company partnering with 48-year-old Microsoft. While it’s tough to say that the leaders are generously valued, I do worry that the vast majority of early stage AI bets will be deeply out of the money for a long time.
- DR: When you find a company that looks interesting, what are the main criteria that a company has to meet before you consider drafting a term sheet?
RG: The 4 Ts: Team, Tech, TAM, and Timing. It’s essential to understand each of these well and appreciate the way they interplay. We consider a term sheet to be an application by our team to join your team, so we also need to be very sure that we all want to work together and that we can work together. The human relationship factor is critical, even in an AI world.
- DR: Presumably, investors have more leverage right now. How is that appearing in term sheets? Are you seeing crazy terms out there?
RG: There’s a good and fair balance in the early stage markets today. Seasoned investors who are committed to the sector recognize that the best founders need to have sufficient incentives to engage and partner. Aggressive terms in favor of either party should be a bright red light to stop and run away. If incentives are not fair and aligned you’re laying a foundation for future problems. Life it too short.
- DR: How do people get in touch with you if they want to share their company with you?
RG: Warm introductions from our network are always appreciated. Please email firstname.lastname@example.org. We look forward to connecting with you!
There you have it. Understanding where your next round of funding is coming from and the obstacles all investors are facing will help you find the middle ground and navigate through funding challenges. Knowing what investors need and aligning that with your startup can be a win-win for everyone.