Craft Beverages Industry Tax and Business Consulting Services
How to Get Investors (capital)
Friends and family are the usual suspects when financing a start-up enterprise beyond the personal investment of the owner(s). Be sure to under-promise with the intent of over-delivering. Resist the urge to be an eternal optimist and keep your financial projections as conservative and understated as possible. Your projections should be drafted to answer the single most important question of your investors – “when will I get my money back?” Be sure to clarify whether your investors are equity owners for the long haul (i.e., a piece of the action) or lenders who can expect some fixed return on their loan with eventual payback. Clearly defining the relationship and managing expectations will be critical as memories tend to grow short over an extended period of time.
Lease vs. Buy
There is no one-size-fits-all answer to this age-old dilemma for entrepreneurs. Often the answer will depend on an analysis of credit, cash flow, timing and terms. Leases may be easier and quicker to obtain, though often the payments will be based on a higher interest rate than conventional bank financing. Don’t assume all leases are alike. We can help interpret and make sure you understand exit terms, obsolescence charges and property tax issues.
As with lease vs. buy, this is another decision that should be thought out in a deliberate and analytical fashion. There is no single right answer, though rules of thumb abound. For example, a Limited Liability Company (LLC) may be easy to form and provide some level of liability protection, yet might not yield an optimal outcome with respect to taxes. We can help you reach that ultimate decision with an analysis of key factors, including the ownership structure of your enterprise, income tax rules, liability protection and long-term objectives.
One definition of depreciation in Wikipedia states, “the allocation of cost of assets to periods in which the assets are used.” In other words, depreciation allows an entrepreneur to write-off a portion of the cost of certain assets (equipment, buildings and improvements) over the time period those assets are likely to be useful. The Tax Code provides strict rules on the calculation of depreciation, while also providing certain elections to speed up or slow down the write-offs to suit the needs of different taxpayers and businesses. We will make sure you understand your options and maximize the tax savings from your depreciation write-offs, which can be critical to your cash flow.
New businesses need to be cognizant of the various tax elections available for reporting income, valuing inventory, adopting a fiscal year, depreciating equipment and entity classification. Often these elections are “locked down” once you file your initial income tax return. Under certain circumstances, these elections can be changed with the approval of the IRS.
The State of Colorado provides a wide array of tax credits and incentives for companies that locate and operate businesses in under-developed geographical areas referred to as Enterprise Zones. There are 19 zones in the State of Colorado and 11 different tax incentives that reward companies for adding jobs, investing in R&D and making capital.