ScreamingBox Technology & Business Rundown

SPEAKERS
Dave Erickson, Shauna Wekherlien CPA

Dave Erickson 00:04
Thinking about starting a business that will make you billions wondering what type of company to form with your partners. We're going to get an accounting of what are the best company structures for your startup and other accounting and tax advice from Shauna, the tax goddess in this green box podcast interview. Please like our podcasts and subscribe to our channel to get notified when the next podcast is released. Welcome to the ScreamingBox technology and business rundown podcast interview series. In this podcast I'll be interviewing Shana the tax goddess to have a real accounting of corporate formation strategies, cutting edge technologies for teams navigating Sass taxes, and celebrating women in the tech industry. I am your host, Dave Erickson, and my usual co host both on Satish is on holiday this week, which makes this podcast part of our interview series. Our guest is a trailblazer in the field of finance, and is a tech savvy business expert in the world of corporate taxation. With years of experience and passion for empowering businesses. She is the founder of tax goddess business services. Please give a warm welcome to our esteemed guest, Shana, the tax goddess, a certified public accountant, and a true tax goddess. So Shawna, accounting to many people is not the most exciting subject in school, and you got a master's in taxation. What drew you to accounting in taxes?

Shauna Wekherlien CPA 01:54
Well, and I always have to preface this with, with two things, right. One, yes, I'm a CPA, which means I know all the boring stuff, accounting and amortization schedules. I know all the boring stuff. But my particular specialty is tax strategy. Right? So I get the fun side of the tax code, which is how do we save you money instead of how do we cost you money, which is much more interesting. And really, that's the beginning of the story of, How did I come into this in the first place. You know, I actually started off in astrophysics. I was gonna go work for JPL. That's what I always wanted to do, since I was like little, little, five years old, astronomy, like this was the thing, okay. And so very long story short, I was at U of A, University of Arizona, which is known for its astronomy program. I was super happy, everything was great. At the end of my first year in college, right, loved my subjects, everything was great. I was back at home with my mom. Now my mom lives in Phoenix and she is my goddess. She's my hero and my mentor, the person I look up to. And I was back at home with her summertime. Right? And we were sitting at the kitchen table and she was opening the mail. Okay, and now normally my mother is very stoic, very controlled. She's German. Okay. So you know if that tells you anything, right? very controlled, very, very metered in almost everything she does. She's opening the mail and she takes his piece of mail and slams it down on the kitchen table, right and pushes back the chair from the, “I can't believe this”, I mean, like, explosion, right? Which, I've never seen that, ever. Right? Like, totally not expecting that. So, Mom, what's going on? Are you okay? But what's happening, right? “The IRS wants more money. This is ridiculous. I'm a small business owner, I spend money all day long. And I don't understand, you know, I pay for commentary was listen, I pay an attorney, and I pay a CPA. Why can't they get my tax rate down? This is ridiculous.” Right? So that's the beginning of this whole thing. Okay. And if you want to read the rest of the story, it's in my newest book, “The 6% life”, okay. But there's a big story to this. So, I'm sitting at this table, I'm freaked out going, Oh, my God, are you okay? Like, what do we do now? And she's like, Well, I mean, there's really nothing to do. You know, I've hired these high paid people and they're telling me this is my tax rate. And when a daughter who adores her mother sees something like that. I'm like, I'm a smart cookie. I'm gonna go work for you. But I can figure this out. We're gonna figure this out. So a little bit of ego, right? The, that the red hair adds a little bit of ego, right that, “I can, I'm smarter than the average bear, I can figure this out”. So long story short, I started taking accounting and finance like the same at UofA, right? College classes, right? But accounting and finance and none of it was helpful. Accounting and Finance is all about recording history, right? I'm like, Okay, well, this this doesn't help me any I know how to count. Right? And you know, it's fine. So I'm back at home next summer. Now it's the following summer, right? This problem It's still rolling through my head. And I'm going, Mom, I don't know how to,how do we get this information? And she's like, Well, are there any tax classes specifically? I'm like, Well, there's one, but it's like intro to tax, like, that's not going to teach me tax strategy. I took it and I fell in love, like, actually fell in love more. So then I fell in love with astrophysics, because taxes are all about playing a game of chess. So I have 20 pieces, 30 pieces, however many pieces I got in my life, I'm single, I'm married, I own a business, I have dogs, you know, whatever these pieces are in your life, okay? And how you move those pieces, according to the rules that are laid out is how you reach your ending goal. Okay. So my mom's end goal was reduced her tax rate, right, which means that was my end goal. So I'm in love with this tax class. I actually switch majors, completely right. So now I'm, accounting finance undergrad with a master's in tax. Right. So now I'm gonna go get this master's in taxation. Well, so I leave, you know, college, I become a CPA, right? I'm starting to get tax strategies. I mean, these things, you know, you get the basic ones right, paying your kids, writing off your dog, paying your spouse, setting up medical expense reimbursement plans, that kind of these baby low hanging fruit strategies. Right. And that was helpful, right? I did help my mom reduce her tax rate a little bit with those. Not a huge amount, but a little bit. Okay. Then I met a lady named Dominique Molina, and Dominique Molina teaches CPAs advanced level tax strategies. And when I found her Li-ooo, ooh, I was so excited. Right? So I spent about two years with Dominique right, learned everything she had to teach me. Now, I go back to the astrophysics. I'm a curious mind. Well, if that's what she knows, what do other people know, what do other people know? What did that, what does this guy over here in Iowa know, right? Like, everybody give me everything. And so at this point, this drive right, to find information and find tax strategies to help my mom effectively, shaped the entire business of Tax Goddess right into a tax strategy. I always call it like a dragon sitting on top of a pile of gold. Okay. Because at this point, anyone that comes to Tax Goddess that is looking to reduce their taxes, they come with their pieces, their chess pieces, right? And we asked them a bunch of questions, and every coin in our pile of gold is a strategy, so we can use this one, this one, this one, this one. So the end of the story here, okay, is that I actually got my mom's tax rate down to 6.92%. Which is why sidenote, the title of the new book is called “The 6%”, right. Our average for our clients is 6% because we use similar strategies across the board, and you know, now, now I'm in love with what I do, right? Instead of astrophysics, looking at the stars, I guess I get to gather all the tax strategies, and I get to look at my telescope at all these things. My microscope, I guess. they're all these strategies now. So I guess from big-picture in the universe to micro-picture for people's universes, right. So anyway, that's the story.

Dave Erickson 08:20
Well, clearly, you have a passion for it. And it's, it's nice to see somebody is passionate about taxes and accounting.

Shauna Wekherlien CPA 08:29
I'm all passionate about saving money, forget, you know, anything else. It's all about saving the money. So

Dave Erickson 08:35
Well, startups and businesses definitely need to do that, especially when they're beginning. So why don't we delve into, you know, I get a lot of questions from other entrepreneurs and people that I do business with. We do a lot of development for startups and other beginning businesses. And they always asked me, you know, what's the best kind of company entity? So maybe, since you've worked on company entities, and it's a question that most people start, you know, should I form a sole proprietorship and LLC, an S corp, C Corp, whatever, maybe you can go in a little bit, pretend I'm starting a start up a business never done business before. I'm going to make a new widget. And I'm coming and saying what kind of company should I start? Maybe, Maybe you can kind of talk a little bit about the different entities and what fits what type of startup I guess.

Shauna Wekherlien CPA 09:35
Absolutely. And I've got a huge grin on my face because we get this, this question asked at least three times a week Right? Like okay, I'm new. What do I do? We get this a lot in our group coaching classes, right? Like okay, I'm new, what do we do because that for newbies, right, so very common question. I love it. So I'm going to start with a question that seems way left field okay, but this will help you pick, start to pick the path. The first question you need to think about is, do you intend to grow this thing to sell it or are you creating this business? I'm gonna call it a lifestyle business, but something you're creating, you're gonna keep. Maybe you're gonna sell it like way down the road when you're ready to retire, but you're really building it for cash flow, it's really for you. Make some money, take home some money, okay? Now, the reason why that question is so important before you can start looking at legal entities or taxing entities or anything else, is that if you're building a business to sell, there are certain types of taxing and legal entities that give you tax benefits when you sell it. So especially if you're going to build, sell within the next five years, 10 years, right, potentially going a C Corporation, which often is more expensive, it's more cumbersome. You have to have board meeting minutes, you know, all of these things, but if you go the C Corporation route, there are ways for you to not pay tax on either the first $10 million of your sale, or not pay tax on the sale at all, like ever on anything, any penny of it, right. So if you're building to sell, you really need to know that kind of in advance. Now, this question tends to trip people up, right? Because they're like, Well, I, I don't know, right? What happened, what happened, I want to build it to sell, but what happens if my business maybe isn't the next thing to sliced bread? Like, you know, it's maybe it's okay, but it doesn't, it's not the next Microsoft, you know, whatever. It's, it's a risk that you have to decide as the entrepreneur, okay. Now, generally, we call it the aggression scale, and we normally relate it to tax strategies, but I'll explain it, then I'll explain how this connects here. So zero to 10, zero, meaning the IRS never calls you never ever right, except for a random audit, and 10, I mean, we're all going to jail. Okay. When I ask an entrepreneur, where do you sit on that scale, 95% of entrepreneurs are like, Listen, give me like an eight, maybe a nine, like, we're not going to jail, but I want every strategy, every penny, every everything. And what this has solidified in my mind is that entrepreneurs are entrepreneurs, not two people, they're entrepreneurs, because they're risk, they’re pro risk, right? I will take the risk to make the money that maybe I'm gonna sell in five years and make $50 billion, you know, like, whatever it is. So, I asked that beginning question about, are you planning to sell? Are you planning to keep it kind of thing to be able to determine this path? So that's step one, right? Are you planning to sell or planning to keep it? Now, if you're planning to sell, so, I'll just continue that path and then we'll jump over to, if you're planning to keep it. If you're planning to sell, one of the biggest things that you absolutely must take a look at before you form the entity, before you go do everything is will your business qualify for something called 1202, stock 1202, code section 1202 stock. If you qualify, this is where you get the 10 million for free, potentially the entire purchase price or sales price for free, right? And when I say free, I mean you can sell it and pay zero tax. Okay, so we have had businesses that were like, Oh, I heard Shauna on this podcast and she said if I'm going to build it to sell it that I should automatically go C Corp. Eh. Timeout, you only go that route, if you qualify for 1202. Okay, if you don't, there are other strategies to get you out of paying tax on sale, even if you're an S corp, even if you're a partnership, right. But if you meet the very thin qualifications of 1202, a C Corp is probably one of the easiest routes to go. So any questions before I jump over to the if you're gonna keep it side?

Dave Erickson 14:00
Well, no, and I, I understand that C corps can be kind of painful to run or costly initially. So it may not be the best one to start with or it may be better to start with something else and move over if you think you're going to sell or something like that. Correct?

Shauna Wekherlien CPA 14:19
And this is a great question. Right? So let's use that example. Right? I'm not sure. I'm not sure if my business is going to sell, I'm not sure if it's going to sell for $10 or $10 million. Like I have no idea, right? I'm just starting to build this thing. Okay. Absolutely. You can start with a different entity and then switch into a C Corp. The only thing that you need to understand is that it will only be valuable, the C Corp , that 1202 stock will only be valuable at whatever it started with. So if you built a business and you now hit $1 million, for example, and you're like Okay, this thing's gonna get big, it's gonna get to $10 million, and then I'm going to sell it. If you at that point convert it, switch it, move the assets, do you know whatever you're going to do to get it to the C Corp, that first million dollars will be taxable, right, you're not going to get the tax free status on whatever it was when you started it. And so you're right, this is where it comes down to the risk of being an entrepreneur. It is more expensive to have a C Corp, where there's separate tax returns, you have to have payroll, as I said, board of directors, minutes, meetings, I mean, on average, the cost to maintain and run a C corporation, typically 15 to $25,000, depending on which state you're in. So as a brand new baby business owner, $25,000 is a lot of money. Right? So you may not be ready to take that on. But if you have, if you are sure, and I guess this is the hardest part, right? This is why I said, it's all about the risk profile of the person setting this up. If you know you are going to drive, you are going to bleed, you are going to sweat equity, everything right until this thing is at $10 million, so you can sell it. You may want to consider starting there in the first place. So, but you're right, you can change later. So great question.

Dave Erickson 16:05
Yeah. And if you're looking at building a business, where you're gonna get investment, that the business is reliant on investment, you may start it as an LLC or something and then once you get investment, the investors may insist that you go as a C Corp or something like that. And you won't have enough revenue at that point to really mean a whole lot. So that might work as well.

Shauna Wekherlien CPA 16:26
Yep,yep. And I think that's one of the biggest things here is that when you talk to, you ask me this question, right? I don't know, the listener. I don't know their specific situation. I don't know all their little chess pieces, right? So when you ask somebody this question, like, maybe this would be my, my Red Flag Warning. Okay, so red flag warning to all the listeners out there. Okay. If you ask somebody that question, and they don't intimately know who you are, they don't know you, they don't know your goals, they don't know your family, they don't know your money situation, right. It's, it's why our team asks so many questions, because I'm not going to give you advice until I know which piece of advice is correct for you. Right? Because every single person's situation is different. So if you talk to somebody, and they say, oh, automatically, everyone should start as an LLC. My personal two cents? Run away. Because that's, they don't know you. How can they possibly give you that piece of advice? And how do you possibly think that that is the right piece of advice without them even knowing who you are? So right, yeah, great, great point. Great point. So we'll jump over, jump over to the I'm going to build it to grow it to cash, cash flow, cash cow run my lifestyle, okay. This is where we go from 1 option to like 50. Right, the whole playing field opens up at this point. So we tend to ask the very first question, we ask them this side is, do you have any liability? Is there any risk associated with what you do? So a perfect example would be an esthetician. Okay? They are putting serums on somebody's face. Well, what if the serum burns somebody? That's, that's a liability. That's a risk right? Programmers, right? You have a liability. You built a program for somebody and now got hacked by the Russians, right, and now their whole system goes down, yeah, that's a liability. So if you have a liability, you do want some form of entity. Now, that could be an Inc, it could be a partnership, it could be an LLC, but you do want some separation between you personally and the business. Now, if you don't have any liability, which is pretty rare, but it happens, there are some, there are some business like drop shipping on FBA, you don't really have a lot of liability, because it's Amazon shipping the thing, you're just the intermediate, right, there's not a lot of liability, so you don't have to have an entity. And especially when somebody is first starting, every dollar that you spend feels like a million dollars, you're gonna have to pay $800 to the state of California to have an entity. Yeah. Right. So sometimes if you don't have any liability, it's okay to start without an entity. But if you have liability, start properly. Okay. So entity, so then the question is, well, which entity do I want? Now, I need to explain, there's a big difference here between legal entities and taxation entities, because legal entities are only, there's only really three choices. I mean, there's some others but they're pretty rare. There's really only three choices, LLC, partnership, or Inc, not, not S corp or C Corp. That's the taxation side but Inc. Okay. Now, if you have an Inc, the only taxation type you can pick is S corp or C Corp. If you have a partnership, the only taxation type you can pick is partnership. If you have an LLC and this is why LLCs are so popular, on the taxation side, you can pick S corp, C Corp, partnerships, sole proprietorship, right? You have all these options, right? And this is, is really where the playing field just got massively wide. So from a legal standpoint, Incs are the oldest entity in the States, they have the most law about them, they are the most, they're both the most rigid, but also the most protective. So if you're in a high liability risk kind of thing, you may want to look at an Inc. Now these are all legal questions; talk to your lawyer, all the good things, okay, but you might want to consider the next one is the partnership. Partnerships are the most flexible, if you have multiple people that have different things. Okay, so let's say for example, Dave, you and I are going to get into a partnership. You are going to be the financier; I don't have any money. So I'm going to do the work, right? We can get into a partnership where one person is putting in the money and the other person is doing the work and we can still be 50/50 partners. And that's okay, because of the flexibility. So if you need flexibility, especially sometimes we see groups, you know, four or five people that came up with a software idea, and so they're all partners. Flexibility is good. We like flexibility. An LLC is the baby of all of the legal structures. Okay. So really LLC stands for limited liability company, it does give you some limitation on the liability side. And then really, it's the taxation side that is going to determine how you write the documents, you know, are you shareholders, is, are you an LLC taxed as an S corp and therefore you have shareholders, right? Are you an LLC taxed as a partnership and therefore you have partners, right? So the LLC 's are a little more loosey goosey, but they're, they're not bad in any way. And they're one of the most flexible options out there, which is why so many people choose them. So yeah, yeah. Okay, flipping over to the tax side. Let's take questions. I want to give you a chance to

Dave Erickson 21:53
No, we’re good.

Shauna Wekherlien CPA 21:54
We’re good,okay. I know the tax talk. It's exciting for me, but like, other people are like, Oh, I was drowning. Okay, so last last bit, then here, guys is the taxation side. So really, again, you have multiple options on the tax side. So you have sole proprietorship, which means Schedule C, or Schedule E. So Schedule C is in cat, or Schedule E is an Edward on your personal return. Schedule C is for a business, Schedule E is for rental property. So anybody dealing with rentals out there, you can be a partnership. So very, again, very flexible. Different people putting in different amounts of money doing different kinds of work, right, partnerships are great. Both of these two, with the LLC taxed as a sole proprietorship, or an LLC, taxed as a partnership, both of those, you will pay self employment tax, 15.3% on almost every dollar that comes through that entity. So structuring in the partnership is super important. On a Schedule C, any dollar profit left, you will pay 15.3%. No ifs, ands, buts, that's what you're paying. Okay. So as your business starts to get bigger, one of the benefits to an LLC being taxed as, right, is that you can switch. You can start as a sole proprietorship, you can switch to an S corp. In an S corp, you only pay the 15.3% on 30% of your income, which is great, right? It's a whole lot better than 100% of your income. And then C Corporations do have double taxation. So you're paying 21%, and you're paying tax on whatever your salary is. And if you take distributions, so C corps, again, huge benefits that the way that I look at all of this, the IRS, when they give you a good, they give you a bad, right? There's the great balance to the IRS University. Okay, so if they're gonna give you the 1202 stock, and a 21% tax rate at the C Corp, you are, you're gonna pay double tax, like they're gonna get their money one way or the other, they're gonna get their money.

Dave Erickson 24:00
I think that was a pretty good summary of the different entities and their advantages and disadvantages. So, you know, part of this corporate formation issue is there's obviously a lot of work in starting the company, there's a lot of things to know, you know, different states have different taxes and prices and obviously, that. So it is good to have some kind of advice on which or at least have an understanding of which type of corporation you're going to find, file or business you're going to start. Are there, Is there things that an entrepreneur can do that help make it more efficient or easier to start the company? I know that there's services like Legal Zoom and those types of things that takes care of kind of the legal side once they've picked it, but on the accounting and tax side, does it matter what kind of accounting or bookkeeping or anything like that you start with, pending on the type of, you know, partnership or corporation you started, or business you started that make a difference? And is it good to go to someone, immediately you start your business? Or even if you have no income or anything, is it, you know, do you need to start then? Or can you do the bookkeeping, like, after the first six months, you've kind of found you got something, then you start doing it? What's your advice on that?
Shauna Wekherlien CPA 25:25
So, so many pieces of advice. Love it. So the first one, I want to jump back really quickly to the legal side. Now, again, I'm not an attorney, but I've seen a lot, right. I've been doing this for 25 years, a little bit of history here and seeing partnerships fall apart in front of my eyes. If you're getting into a partnership, so, so not you and your spouse, but like, you know, Dave, you and me, two completely independent people. We know each other, we like each other, but okay, when you get into business with somebody, anybody, the first year, it's like a marriage. Literally, everybody has rose, rose colored glasses, Oh, you didn't do the work, no problem, do it tomorrow, right? Like, whatever, everybody's in love. The most important document if you're getting into business with somebody else, okay, the most important document you can have is the operating agreement. And I would recommend that before you even form the entity, before anybody puts money into a bank account, before you do anything, that operating agreement, you've looked at it, your partners have looked at it all the attorneys have looked at it and everybody has agreed and signed that this is what we're going to do. Because your operating agreement is effectively a prenup, right? If you don't do your job, if I don't do my job, you can kick me out. And who gets my shares? What if I die? Does my spouse get my shares? Or do you have first read refusal to buy those shares before they go to my s…, because what if you don't like my spouse? Right? So the operating agreement is the most important document if you've got partners. So just before we get off the legal legal topic, I wanted to make sure to get that out. That's, that's where I see people's love. And rose colored glasses fall apart on the other side of my desk when I start asking those questions, right. So, have that first do not do anything, no money, especially until you have that thing. Now I will say, I'm so sorry to harp on this, but I will say you have no idea how many times I tell that to people, they're like, Oh, we will be fine. Six months later. Now we have lawyers involved. And when lawyers are involved, the only people that get paid are the lawyers. So you know, get the document, get it done. Okay, I will stop harping. Let's move on to accounting, and bookkeeping, and numbers and all the other things now. I absolutely understand, right, that when you're first starting, as they said, every dollar every $1 Feels like a million dollars, right? So you were super cautious about your spending, about where you're putting your money, these kinds of things. I, personally, I'm in love with QuickBooks for basic accounting. I'm in love with QuickBooks, okay, and when I say basic, I mean we have clients running $50 million companies using QuickBooks. So for your brand new, sorry, go ahead.

Dave Erickson 28:09
Yeah, we've been using QuickBooks since we began.

Shauna Wekherlien CPA 28:13
Quick, QuickBooks is fine. And one of the things that I love about QuickBooks, I want to make sure I'm not saying Quicken. Everybody sees the personal level Quick, it's not Quicken its QuickBooks, okay. It's the company level thing. One of the things that I love about QuickBooks, their support is generally pretty good. Okay, YouTube, billions of videos, how do I write a check? How do I make a deposit? How do I reconcile my bank? How, what should I be doing in QuickBooks to make sure my books are good, right? Like, YouTube is a plethora of information from the standpoint. And ,and they've made it very user friendly. Right? So this is, you don't have to have an accounting degree. You don't have to know how to do this. So my recommendation, a lot of people, when they first start their business, they build everything in Excel. It's easy, it's a table, I can see what I spend, right. One of the downsides to doing it that way from, from day one, okay is that at some point in the future, three months, six months, a year, whatever it is, when you start making some real money, okay, and the bank, you go to the bank saying, Hey, I'd like to get an equipment loan, I'd like to set up a business credit card, right? Banks gonna look at your Excel and laugh you out the door. Right? No. So then you're going to spend money with a bunch of bookkeepers or 50 hours of your time getting really into QuickBooks. So my recommendation is when you're first starting a business, I know you're stressed. I know you don't have a lot of time. Even hire somebody on Fiverr whatever. Give me the basic brain dump download. How do I use QuickBooks? Spend three hours with me and teach me like my own private course on QuickBooks, right? Start in QuickBooks, start, use QuickBooks, right? Yeah. Anyway, that's, that's the biggest thing.

Dave Erickson 29:51
Yeah, they have a bunch of Xero, QuickBooks, FreshBooks, a bunch of, I've started businesses with different ones, you know it's, some of them are pretty intuitive. Like I have another business, we just use FreshBooks. It's the cheapest; it's easy. We're not doing anything complicated or anything like that. When we started ScreamingBox, it was a little bit more complicated. So we went with QuickBooks. QuickBooks Online 10 years ago wasn't very good. Now, it's beautiful. But you know, over the years, they keep improving, it gets better and better. And so our accountant uses QuickBooks. So, you know, it just stays there. And it's fine.

Shauna Wekherlien CPA 30:32
And I'm just about to say, Dave, I'll be very honest with you, right? Because, yes, I mean, our team is 90 people. So our staff is 90 people, right? So we've seen every program under the sun. One of the benefits of FreshBooks, Zero, you're right, they're fine. However, *everybody else uses QuickBooks. Everything your accountant does your tax preparer does your tax strategist does your financial advisor. Everybody uses QuickBooks. So I get it, you're trying to save 10 bucks or whatever, by going with, you know, Xero, or whatever else, it's the free, the fresh one sometimes can be free. It's one of the few places I would say don't skimp on the money, just get QuickBooks, then you have all your history forever and ever and ever and ever in one piece of software, you don't have to redo it. Stick with QuickBooks.

Dave Erickson 31:19
Sure. All right, well, we've kind of gone through a lot of corporate formation stuff. Maybe we can get a little bit into some specifics. So I figured out, kind of, what company I want to start. I'm going to build a technology product, a SaaS product. What kind of business considerations, accounting considerations should a SaaS start thinking abouts they start business? So writing the code and building the product is the easy part. The part that, that gets hard is when the engineers who are building this company and building this product get to the point where, Oh, it's done, let's launch it. And at that point, there is all kinds of issues, marketing and sales, and they have to actually make a company that's going to do something with this SAS and, and all that type of stuff. But even just on the business side, okay, we're launching our product, we want to launch our product, we're gonna start receiving money. We've already had some costs building it. But now we have costs running it, operating it, supporting it, and receiving money. How do we integrate it all in? What do we use? What do we do? Right?

Shauna Wekherlien CPA 32:38
Love it. Love it. So I'm going to tell you, I built Tax Goddess from me being in a room by myself to, as I just said, 90 people, okay. Our firm has 13 different departments, right? Marketing and programming and sales, and of course, the technical tax trends and billable bookkeeping, you know, all these people, okay? The very first hire that made a massive difference in the way that tax goddess operated and grew, because when we first started, I'm a technical person, right, doing taxes. I had bookkeepers, they did bookkeeping, like I knew those two interstates. So this is the same thing, you know, engineers build and build this, they know what they're doing on that front, right? Very first hire, and I would recommend to anyone, is somebody in Operations. And this could be an Admin, that just is good at operations all the way up to an actual, like, CEO level. Now, I don't think when you're first starting, you probably don't need a CEO level. But the way I was looking at it is almost like a mother hen for the office. Okay, your operations person, at least the very first one that you ever get, often is the office manager, you hear titles of Office Manager, Assistant, you know, Admin Assistant, something like that, right? These people, their job is to organize and run everything that is not the product, right? So you've built the SaaS, their job is to hire somebody in HR, right? Or at least interview for you, bring you some resumes, right? Their job is to interview and find marketing, their job is to determine whether you should or should not even look at an advertising path. Do you need a technology guy to like, secure your software, you know, all of these kinds of things. Operations does that. So the very first hire that I would recommend that you get, if every single person in that room is a programmer, very first person is somebody in operations. Now, your operations team, when you find and this really goes to the level of the person that you've hired, I would recommend that if that's all you have is a bunch of programmers sitting in room, you get somebody who's been in operations for at least 10 years at least, okay? They're going to be expensive. You're going to look at that go, oh, how much do I have to pay you? Right? They will be worth every penny. Because once you have that operations person, you and your programmers or your team can focus on making the program, the operations job, you have to tell them you have to learn how to delegate, right? You have to tell them what you want them to do, then they will go do it. Right. So as you start to expand, Operations might hire HR because you need to hire more people. Operations might hire the marketing people, sales teams, right? Operations may hire an attorney. At this point, if you're a bunch of programmers sitting in a room, hopefully your corporate guy is at least somewhat involved, right? Do you need a day to day corporate attorney, you know, maybe not full time on the payroll, but like on retainer, you know? So all of these things, even sometimes simple things, right? And this is where a lot of companies will have at least one admin already, right? You got a bunch of programmers sitting in a room with a desk, who's giving them coffee, or loading the printer with paper. Programmers don't think about that thing until they go, oh, there's no paper, where do I? How do I buy paper? Right? Like, they're focused on programming, which is what they should be doing. So yeah, anyway, my very first hire would be somebody in operations, for sure.

Dave Erickson 36:10
You know, you have an operations person, he's got to start receiving. I mean, they need to figure out how do they get money? How do they earn money? How does the accounting work? What technologies are available for SaaS to help them or help their, in the end, their accountant and their tax person keep their business running efficiently without a lot of overhead and taxes and other things? Are there technologies that help this? Or what should they think about?

Shauna Wekherlien CPA 36:40
Well, and you know, the technology questions, really hard question, because literally, I could say it, and two seconds later, six new technologies pop up, that is going to change, whatever whatever's happening, right? Like I mean, the one thing I will say, and this is part of the reason why I do. Again, I like QuickBooks. QuickBooks can do invoicing. QuickBooks can process your payments. You can run your merchant processor through QuickBooks, like Intuit, the company that owns QuickBooks, is big, right? And so they have a lot of processing, like back office processing power, I believe that Intuit even has HR. So I mean, it really, it can be a one stop function for you. It is a little more expensive. But it saves you from having this person over here and this person over here and somebody has to coordinate all these different software's to do whatever it is you're trying to do. Right? So one of the things we often, I think that, I think the phrasing is, a penny wise and pound foolish, right, where I'm gonna save $2, but now I'm adding $20 Over here, because now my person's got to do this by hand for an hour. So again, with a startup, I would look at QuickBooks, I would take advantage of what they offer. They have, you know, a little button that you'd put on your website saying Pay Me, right, and all goes directly into QuickBooks. So I do like QuickBooks from that standpoint. But there are a million different software's depending on what you've built. Right? So I don't even know there's, there's sales and marketing platforms that are specifically for SaaS, right, where you can get into affiliate programs to get your word out there. I mean, there's a million different ways to look at this kind of stuff. I think the biggest thing, the two biggest things that I would say when analyzing any technology for any business, one, is it secure? Who built it? What are they doing? What's their back, like intuit's huge, you know where they are, okay, you download some guy's little piece of software off a website saying, I'm going to solve all your problems. And now you found Mr. Russian hacker, right? Like, you know, so be very cautious about who you're using the security and double check them and take a demo and like, look at the guy's office in the background, when you're watching the demo. This kind of stuff, right? You want to be very, very secure, because your program is your baby, right? If somebody hacks in and steals it, you're done. Like, there goes your business, right? So security is a big thing for programmers specifically. And then the other thing…

Dave Erickson 39:08
Now with a, with a SaaS business, they're, they're just going out on the internet and their customers can be anyone anywhere. So the income stream is not like an income stream you incorporate in a state. It's not like the only people who are gonna use your software from that state. Your global, its global. I assume that somehow affects taxes and accounting

Shauna Wekherlien CPA 39:32
Not really. So this, Okay, interesting bit now. Now, let me backup. There were certainly global sales. There are really three, three categories here. Okay. So their sales in general, doesn't matter where they come from. You sold the dollar, you have your expenses, you're gonna pay tax. I mean, that just is what it is right before implementing any tax strategies or specialty stuff or whatever, right? Like that's what it is. You made $1 You spent 50 cents you're paying tax on 50 cents. At the state and local level inside the US, okay. It's typically called salt state and local tax. Right? So salt, your salt taxes are very dependent on how much you sell into any given state, city locality. Okay? Generally now this is a very broad rule of thumb. Generally, if you if you have more than 200 transactions inside one state, or you some more than $100,000 into one state, you will most likely have to file taxes at that state level. Right? So if you're only selling 50, transactions and $50,000, in all the various states, the only place you have to pay tax at the state level is your home generally. Okay, there's some, there's a lot of tiny exclusions here. But generally, if all of a sudden people in Iowa start buying your your software, right, and everybody and I was like in love with you, right, you will now have to add Iowa. Okay. So that's the first thing you have state and local taxation. So that's income tax. In some states, you also have sales tax on software as a service. So every single state has their own set of rules. When you work with your CPA, as a SaaS company, when you work with your CPA, you need to make sure that you find a CPA that knows state local taxes and knows the, oh my god, my brain just died. The other one I'm just talking about, oh, my brain just died. I apologize. But the CPA needs to know both the state local taxes and they need to know sales taxes, thank you. They need to know the sales taxes for where you're selling. So again, I come back to your main accounting system better track, who did you sell? Where were they? QuickBooks has a built in function, should I charge sales tax or not charge sales tax on this sale? Right? Because the last thing you want to do, we've seen that a million times sell into the state and then a year later the state's like, so where's our sales tax? Funny, right? We want our money. You never collected it from your client, guess who's on the hook for paying sales tax, not your client, you right. So got it, got to have a CPA that understands the sales taxes, understands state local. Now there's one other category and this is a much bigger strategy as you start to get bigger, okay, but it's something to kind of keep in the back of your mind. There is a certain type of tax strategy, it's called an IC Disc.. I, I, me, myself and I, okay, IC disc, d i s c, okay. And IC disc handles overseas transactions. So if your software has gone global, right, and it's being used around, you know, every country in the world, there's a certain tipping point, that when your sales are more overseas than they are in the US, you may actually want to change your entity set up a separate entity for global sales. There's, there's a whole thing that is happening globally, for global sales. So anything outside the US now that would include Canada and Mexico, it's, it's not North America, right. It's the U.S. versus anywhere else. So definitely be tracking that within your accounting system as well. Because basically, when you do more overseas, you want to talk to, at that point, probably your tax strategist, not any CPAs, no IC Disc. Considering there's only 607 tax strategists in the country, right. Make sure you talk to a tax strategist when you get to this tipping point. So

Dave Erickson 43:37
Okay, one of the things that you mentioned about is, team, we talked about IT, Operations Manager, but one of it's kind of like, you know, there's a lot of technologies that are happening, and you're running a fairly large, diverse team. What are some of the technologies that you're using or processes that you're using that help you manage a large team spread out everywhere?

Shauna Wekherlien CPA 44:03
You got it, and you nailed it? Our team of 90 is in 20 different countries, 20. So yeah, talk about global. But yeah, absolutely Slack, which I'm sure everybody listening to this podcast has at least heard about Slack. Slack is an absolute lifesaver. Now, I will say that Tax Goddess, as a company, we break software. I love systems, and I love software. And so we've broken slack twice. Their programmers hate us. But because we use Slack to do so many different things. So integrations with Zapier, to dos, calendars, meetings, like everything is in Slack. And so it becomes a hub, basically, in my opinion, a giant Wikipedia. So when we hire a new team member, and we say great, you need to learn. This morning we were just talking about Kajabi right. We have an educational course platform we're using Kajabi. We have this new team member, You need to learn Kajabi, go to, we set up a training channel on Kajabi so they can watch all the videos and see the history and see all the conversations and get like, you know, matrix level download just on Kajabi or whatever it is. So Slack has been invaluable. Of course, Zoom. We use Zoom to hold meetings and communicate with everybody. We do use the Google Suite. From that standpoint, of course, super easy for files and security and everything else. I'm trying to think now for, for system, this is where everybody kind of has their own preference. For I would say I'd call it our database store that handles our CRM and handles our project management, contact records, you know, tagging and all this kind of stuff. We use a program called Insightly Insightly, one of the reasons we chose it, Insightly is extremely customizable, right. So we've again, we've broken Insightly before, we've worked with their programmers, but it's extremely customizable. The only downside to it is, is that when you're first starting, Insightly is massively overwhelming, right. I mean, we've had Insightly now for 15 years, so it works really well for us, because we know what we're doing and how to customize it. What I have seen with a lot of clients, especially when they're first starting up, looking at something like Asana, or Trello would be kind of maybe the better starting Trello seems to be an easy one drag and drop cute little cards, everybody can kind of see what's going on. People really like Trello. And yeah, I think that's that's kind of our current tech stack that I can think of so I, QuickBooks, of course.

Dave Erickson 46:37
Yeah. Yeah, there's a lot of different ones. What about communication? One of the things that I found using a diverse team is that they all have different things or platforms they prefer to use for communication. And although slack is good, some people like you know, something else. Has that been an issue or?

Shauna Wekherlien CPA 46:59
I suppose this is the downside to having a redhead owner right, Slack is it. I don't care if you like Skype or WhatsApp, it's slack. Period. Got it. And we've made it a company rule. I mean, not only across our team. All of our clients use Slack, all of our vendor partners use Slack, all of our affiliate partners use Slack, right? You want to work with us? You use Slack, because there's no way and I know the pain you're talking about here, right? I'm going to work with you in Skype, and I'm going to work with you on WhatsApp and I'm going to work with you on Discord. No, right? So we,we just put our foot down and said, Listen, with a team of our size, we cannot keep our team informed about what's happening. If there's si… email, are people still sending email? I don't even know why that still happens. Who uses email these days? Anyway? Sorry for anybody that loves email, but

Dave Erickson 47:49
Oh, I do but, that’s me.

Shauna Wekherlien CPA 47:53
Yeah, we just don't use email, like at all. So Dave, I'll give you a great point. Because I know you've sent emails, you know, to me and my team, right? I don't read those emails, my admin reads those emails, posts them to slack and then we have a conversation about it in Slack and then she replies, because I don't do email. So it has actually helped the efficiency of my staff as well, because they're not having to check 16 places to, Where did, where did Dave send that message was that email was us. I don't know where that was right? Everything's in Slack. And we can film video. I'll be very honest with you, audio recordings, and video recordings are built into Slack. It might be on one of the upgraded levels or whatever, we've got the super HIPAA compliant level or whatever, for security. But I love the fact that Dave, if I can't catch you for a meeting, I film a three minute video, then it's in your slack and then you can reply to me with a three minute video and we've just completely cut out a half hour meeting. So, all about it.

Dave Erickson 48:53
This is a subject we're both kind of passionate on. I know this. I'm passionate on it, because I have a young daughter. You're passionate on it because you're a woman. But that is and we're both kind of in the technology space. Maybe you can talk a little bit about your experiences as a woman in technology. And where do you think women's, how are women going to advance in technology and get the equality of pay and respect that is needed?

Shauna Wekherlien CPA 49:27
Oh, great question. I'm gonna start with that last one. First, how do you get a quality of pay and respect that you need? You start your own company and start charging people as a contractor not as a W2. Right? But I realize not everybody can do that. Right. So some people are, there's W2 mentality and there's a 1099 contractor mentality, business owner mentality. It's very difficult because it's just you know, as a W2 employee, it is what it is and that's the market and so the best thing you can probably do for yourself if you're the W2 mentality, which isn't bad. It's just different. Right? Job hop, job hop until you get where you need, right you have a very desirable set of skills. Being a woman in technology, you've got two things one, technology background and two, many of the large companies still have, like, quotas, We need at least one woman on the team. Don't even get me started on how frustrating that kind of commentary is. Use it to your advantage, right? Job hop, do what you’ve got to do, get the RSUs and the ISOs and like, go get the shares and build up your portfolio. Do what you got to do to get paid what you're worth. Right. So, so from that standpoint. As far as frustration I, there, even today, it makes me smile. So my head of operations, his name is Michael. Okay. He's from Uganda and when we get on a meeting with, even though, listen, the name of the company is Tax Goddess. Female. Okay. Even still, today, we will get on meetings with vendors, they start talking to him instead of me. And I'm like, really? Okay. So part of it. Part of it is, there's a difference between, in my opinion, how you feel about things, versus what things are in actuality, right? So yes, I get, every once in a while, even been doing this for a long time, our company will turn 19 in eight days; our charter company turns 19 years old, okay. Even though there's a little bit of like, really, like, I'm the owner, hello, talk to me, right? I look at that. And I say, Listen, my ,my team is doing what they're supposed to do. Right? I am getting benefit because the vendor wants to work with my head of operation. Fine. That means I don't have to attend meetings. I don't care, right. So I've kind of dropped the emotional attachment to the, to the perceived slights or like, you know, those kinds of things that happen because it's just, do I care? Am I still getting the outcome that I want, which is where I go to Job hop. Do what is right for you, not necessarily what's right for the company you're working for. Right? And if, if you can go the contractor entrepreneurship route, which, which isn't for everybody, but if you can go that route, you will have the control, right, you will have the knowledge until you decide to let it go as in, I've let it go to my operations manager. Now, I don't have to attend meetings. Great. Please, go do that. Right. So yeah. Does that answer your question?

Dave Erickson 52:30
That was definitely part of it. Um, how do you think that in, in the education system, women are being prepared or trained or motivated to go into technology? Because for a long time, a lot of technology, you know, it's an education based experience, you got to get a certain education at a certain level, to be able to go into technology, particularly engineering or other things like that. The schools have always been very male dominated for many decades, right? Or for centuries, right? Yeah. If a woman is interested in technology and wants to, you know, focus on technology, what are some of the things that they need to do or to focus at the schooling level to make sure they get prepared for, for going into technology? I mean, you're, you're doing accounting and taxation. I don't know what the ratio is. But you know,

Shauna Wekherlien CPA 53:36
There's not a lot of women in my industry. It's, it's, I know, it's a good old boys club, and has been for a really long time. Yeah. I think the biggest thing is, make connections with people. The bigger and stronger your network is, the more likely you are to get the help that you need that you want, right to be able to focus on what you want. And the only other thing I would say is if somebody tells you, you no, turn into a redhead, and go, Bull bull in a china shop, okay, I'm sorry, no, what? Like, no, I want that. So either you're gonna give it to me, or I'm gonna go around you, and I'm gonna figure out how to get it. So. And that's tough because for, especially for a lot of women, I realize I'm a redhead so this is like a part of my personality to go, to go do this. But for a lot of women, they get told no, and they're like, okay. You want it honey, you gotta go get it there. Nobody is going to give you a leg up. Nobody's going to help you. Right? Except your network, which is why I started with, build your network because you're going to make friends even if you're the one girl in the programming class or whatever it is, right? Make friends with the boys, okay? Because at some point, they will be in that company you want to job hop to, they will know a guy that knows the guy that can get you into this or can do this. And if they know you and like you and trust you, which is the whole point of building a network, right, your ability to get done what you want to get done has just increased tenfold. Easy. So,

Dave Erickson 55:04
So if you were a young woman saying, I want to get into astrophysics, what would you advise them?

Shauna Wekherlien CPA
Why would I advise them?

Dave Erickson
Take a look at taxation.

Shauna Wekherlien CPA 55:21
AHHAHA, Now you’re just being a troublemaker. No. But, but Well, I, what I will advise you is you have to do what you're passionate about. And I realize it's so cliche and everybody says that right now, right. But I 100% firmly believe I still love astrophysics. I drive out, I live in Arizona, I drive out into the middle of the desert with a telescope to go look at the cool whatever's happening, you know, the planets are aligning, like, oh, let's go with it. I still love that, I do, okay. But if you don't, if you're getting into something just because your mom said to, or you think that's what you should do, or somebody, it's not, it's not the right choice. It's just not, you have to find what is passionate for you. And I think one of the things that I've seen just recently that I thought was really cool, and I'm gonna smile, because I literally have this on my desk, it's on a little piece of yellow paper. This is something called Ikigai, which comes from the Japanese. They draw three circles overlapping kind of like a Venn diagram thing, right? What would you do for free? What would you love to get paid to do? And the third one is how do you spend your free time? And you write out like, okay, for me, I would spend my free time gardening, traveling, hosting parties. I love entertaining. What would I love to get paid to do? Speak guide? Teach? I love teaching. It's a big thing for me. What would I do for free travel? Speak garden teach? You heard there's like a lot of overlap here. Right? So the Ikigai is the thing in the center, where all three of those things overlap, right? That Ikigai, for me, was teach and guide. And so in my day to day, right, I get to do that with tax strategies, which sounds ridiculous. It sounds so different from each other. But I get to teach business owners all day long, how to not pay money to the government. I'm thrilled. I love what I do. I'll spend 12 hours a day doing what I'm doing, even if I'm exhausted, I'll do it. And so I think that to me, that's the answer to your question. If you want to get into whatever it is, astrophysics program, it doesn't matter. Right? Kind of goes back a little bit to that bull in the china shop if that's your Ikigai, and that's what you want, Go get it! Don't be a brat about it, be nice, polite, professional, right, but go get it because nobody's gonna hand it to you. So

Dave Erickson 57:44
Well, Shauna, thank you so much for taking this time to fill us in on this wide range of topics related to accounting, business strategy, SaaS and women in technology. For our listeners, please join us in the first week of next month for another ScreamingBox technology and business rundown podcast. And until then, just kind of keep everything accounted.

Dave Erickson Outro
Thank you very much for taking this journey with us. Join us for our next exciting exploration of technology and business in the first week of every month. Please help us by subscribing, liking and following us on whichever platform you're listening to or watching us on. We hope you enjoyed this podcast and please let us know any subjects or topics you'd like us to discuss in our next podcast by leaving a message for us in the comment sections or sending us a Twitter DM. Till next month. Please stay happy and healthy.

SUMMARY KEYWORDS
quickbooks, tax, business, accounting, building, slack, technology, strategies, cpa, astrophysics, company, entity, sell, llc, partnership, starting, programmers, money, team, taxation

Summary Timeline:

Podcast begins. 0:04
Shana is a trailblazer in the field of finance and a tech savvy business expert in the world of corporate taxation.
She is the founder of tax goddess business services

How did you get into the field of accounting? 1:54
The beginning of the story of how he came into this in the first place.
The story of his first year in college, and how he got started in accounting and finance, and why the IRS wants more money than him.

The tax strategy game of chess. 5:00
Taxes are like a game of chess, and how one moves the pieces according to the rules is how they reach their ending goal.
Dominique Molina teaches advanced level tax strategies.
Spent about two years with dominique and learned everything she had to teach him. She shaped the entire business of tax.
His mom's tax rate was down to 6.92%.

What is the best kind of company entity? 8:20
The first question to think about is if you intend to grow this thing to sell it or if you are creating this business for cash flow.
If you are building a business to sell, there are certain types of taxing and legal entities that give you tax benefits.
If you go the c-corp route, there are ways for you to not pay tax on either the first $10 million of your sale or not pay any tax on the sale at all.
If you're planning to keep it, one of the biggest things to look at before selling.

Start with an llc or switch to a c corp. 14:11
It may be better to start with something else and move over if you think you are going to sell or something like that.
The cost of maintaining and running a c-corporation is typically 15 to $25,000, depending on the state you are in.
The first question to ask is, do you have any liability? This is a red flag warning to all the listeners out there.
The whole playing field opens up at 50.

Is there any liability associated with your business? 17:53
If there is any risk associated with what you do, a perfect example is an esthetician who is putting serums on someone's face.
If you have a liability, you do want some form of entity, such as a partnership or an llc.
Inks are the oldest entity in the states and have the most law about them. They are the most rigid but also the most protective.
Partnership partnerships are flexible if you have multiple people that have different things.
Sole proprietorship, schedule c or schedule e, and how they are different, and why structuring in a partnership is so important.
C corporations have double taxation.

Advice on how to start a business. 24:00
There is a lot to know when starting a company, and it is good to have an understanding of which type of corporation to start with.
The legal side.
The first year of a partnership is like a marriage. The most important document to have is the operating agreement.
When lawyers are involved, the only people who get paid are the lawyers. The only people that get paid is the lawyers, not the partners.
Every dollar every $1 feels like a million dollars, so it's important to be cautious about spending about where you're putting your money.
Quickbooks is a great tool for basic accounting, and has been used by clients running $50 million companies using quickbooks.

How to choose the right tax software. 29:51
Quickbooks is the cheapest and easy option. Quickbooks has improved over the years, and is one of the few places to save money.
The benefits of using quickbooks are discussed.
Writing the code and building the product is the easy part. The hard part is when the engineers get to the point of launching the product.
The first hire.

Hire somebody in operations. 33:19
The very first hire is someone in operations, an admin that is good at operations all the way up to an actual CEO level.
The first person in the room as a programmer is somebody in operations. This goes to the level of the person that you've hired.
SAS needs to figure out how to get money, earn money, and how to do the accounting work. Technology to help them keep their accountant and tax person running efficiently without a lot of overhead.
The two biggest things to look at when analyzing any technology for any business.

Selling software on the internet. 38:39
Security is a big thing for programmers. Be cautious about who is using the security and double check them and take a demo and look at the guy's office in the background when you're watching the demo.
There are three categories of taxes, state and local, income tax and sales tax.
Find a CPA that knows state and local taxes and sales taxes. Quickbooks has a built-in function to decide whether to charge sales tax on a sale.
Consider setting up a separate entity for global sales, especially when selling overseas.

The importance of using slack. 44:03
Slack is an absolute lifesaver for tax. Slack is a hub, a giant wikipedia. They use Slack to do many different things, including integrations with Zapier, calendars, meetings, everything is in slack.
Zoom is used to hold meetings and communicate with everyone, and they use the Google suite for files and security.
One of the challenges of having a diverse team is that they all have different platforms they prefer to use for communication. Slack is the preferred platform for communication, and it is a company rule.
Slack has helped the efficiency of Dave and his staff.

Experience as a woman in the technology space. 48:53
As a woman in technology, how women are going to advance in technology and get the equality of pay and respect that is needed.
How to get a quality of pay, respect and respect you need to start your own company and start charging people as a contractor.
Do what is right for you, not necessarily what's right for the company you're working for.
In the education system, women are being prepared or trained or motivated to go into technology because of the male dominated education system.

Advice for young women interested in astrophysics. 55:03
If a young woman wants to get into astrophysics, she would advise them to take a look at taxation. She would also advise her to do what she is passionate about.
She has a yellow paper called ikigai, which is a venn diagram from the Japanese.
If shauna wants to get into an astrophysics program, it doesn't matter what it is. She'll get it if it's what she wants.
Join the next screamingbox technology and business rundown.