Finances for Startup

[cracktojack]

Hi,

We've incorporated new company with paid up capital of $100. But now we have some confusions over handling our finances... So pls help:

1. We've paid up capital of $100. As a startup we won't get loan from any bank, so I will take personal loan and fund my business. But does it mean I've to increase my paid up capital? How should I incorporate in my accounting?

2. We've hired couple of freelancers for the website development. They all are based in India. Now should I pay them advance from my personal account in INR till i get personal loan and fund my business? If i pay them first from my personal account, then can I transfer equivalent SGD into my personal account from company's account?

3. Any website resource to help for starting book keeping for company? Any software if you guys can suggest?

4. Do i need to hire CA or we can do accounting ourselves? If it is better to hire CA then can u guys pls suggest any firm/guy to whom we can outsource our finance handling and company secretary?

I know we've asked loads of questions, but as an expat, this is the best forum I can ask questions to.

Regards,
Andy

[jpatokal]

1. We've paid up capital of $100. As a startup we won't get loan from any bank, so I will take personal loan and fund my business. But does it mean I've to increase my paid up capital? How should I incorporate in my accounting?

A loan to your business is just that -- a loan. File under "Liabilities".

2. We've hired couple of freelancers for the website development. They all are based in India. Now should I pay them advance from my personal account in INR till i get personal loan and fund my business? If i pay them first from my personal account, then can I transfer equivalent SGD into my personal account from company's account?

Yes. Your personal funds are the company's "Petty Cash" account. Total up your expenses monthly, with receipts, and top up from the company account.

3. Any website resource to help for starting book keeping for company? Any software if you guys can suggest?

I like Gnucash: free, but not terribly user-friendly.

If you hire an accountant but want to do your own bookkeeping, they'll recommend their favorite software. See eg. Peachtree.

[Nath21]

Hi,

We've incorporated new company with paid up capital of $100. But now we have some confusions over handling our finances... So pls help:

1. We've paid up capital of $100. As a startup we won't get loan from any bank, so I will take personal loan and fund my business. But does it mean I've to increase my paid up capital? How should I incorporate in my accounting?

2. We've hired couple of freelancers for the website development. They all are based in India. Now should I pay them advance from my personal account in INR till i get personal loan and fund my business? If i pay them first from my personal account, then can I transfer equivalent SGD into my personal account from company's account?

3. Any website resource to help for starting book keeping for company? Any software if you guys can suggest?

4. Do i need to hire CA or we can do accounting ourselves? If it is better to hire CA then can u guys pls suggest any firm/guy to whom we can outsource our finance handling and company secretary?

I know we've asked loads of questions, but as an expat, this is the best forum I can ask questions to.

Regards,
Andy

Some advice there are three successful business attributes of which 70% of people have only one, 25% have two and 5% have all three. If you dont analyse yourself honestly you wont succeed. They are Managing, Recording and Selling. Work out what your good at and concentrate on it and hire other people who compliment the other attributes.

[Strong Eagle]

Hi,

We've incorporated new company with paid up capital of $100. But now we have some confusions over handling our finances... So pls help:

1. We've paid up capital of $100. As a startup we won't get loan from any bank, so I will take personal loan and fund my business. But does it mean I've to increase my paid up capital? How should I incorporate in my accounting?

You have two ways to put money into the company. You can purchase more stock and have more equity in the company or you can loan the company money. The primary advantage of having paid up capital is that you have a company of substance, which may or may not matter... it does for my company. The primary disadvantage is that you cannot get your money back out until you unwind the company... although this is not necessarily a bad thing.

If you choose to loan the company money, the company must pay you some small amount of interest on the loan. The advantage of a loan is that you can get your money out as soon as the company can pay the loan. The disadvantage is that you have a liability on your balance sheet which won't help for things like trade credit.

2. We've hired couple of freelancers for the website development. They all are based in India. Now should I pay them advance from my personal account in INR till i get personal loan and fund my business? If i pay them first from my personal account, then can I transfer equivalent SGD into my personal account from company's account?

As JP noted, the easiest way to do this is to pay out of your own pocket, then file expense claims against the company. The alternative would be to loan the money to the company from your personal account and then pay the contractors. My own personal preference: Never mix business and personal transactions. Therefore, if it were I, I'd loan the money to the company and pay the contractors on a company check, not my personal check.

3. Any website resource to help for starting book keeping for company? Any software if you guys can suggest?

There are several packages available... Peachtree, MYOB, MS Small Business. But, let me ask you... what do you know about double entry accounting? If nothing, you need to learn about debits and credits. Do a google search for double entry accounting and choose a site with a tutorial.

4. Do i need to hire CA or we can do accounting ourselves? If it is better to hire CA then can u guys pls suggest any firm/guy to whom we can outsource our finance handling and company secretary?

I would definitely engage a CPA unless you know all the rules about keeping minutes and directors resolutions, handling AGM's, etc. Also, you'll want someone familiar with end of year adjustments... like which year to take dividends and bonuses, etc. You can email me for the name of my firm.

I know we've asked loads of questions, but as an expat, this is the best forum I can ask questions to.

Regards,
Andy

[jpatokal]

If you choose to loan the company money, the company must pay you some small amount of interest on the loan.

Says who? Why is it my company's problem if it finds a sucker like me willing to give a loan for free? The only thing my accountant cautions against is taking personal loans from your company.

[Strong Eagle]

If you choose to loan the company money, the company must pay you some small amount of interest on the loan.

Says who? Why is it my company's problem if it finds a sucker like me willing to give a loan for free? The only thing my accountant cautions against is taking personal loans from your company.

You are correct, JP... I got it bass ackwards.

[cracktojack]

Thanks Strong Eagle and JP... you cleared almost all my doubts. Thanks a ton

Strong Eagle, I'll mail to know company's name who handles secreterial work for your company in a while

Nath21... I agree to your points and hence I also favor outsourcing to the people who excel in their own area

[cracktojack]

There are several packages available... Peachtree, MYOB, MS Small Business. But, let me ask you... what do you know about double entry accounting? If nothing, you need to learn about debits and credits. Do a google search for double entry accounting and choose a site with a tutorial.

Aren't these products follows US GAAP? does singapore also follows US GAAP or it has its own accounting practices?

Moreover, do I need to follow IFRS (may be at a later date)?

[Strong Eagle]

There are several packages available... Peachtree, MYOB, MS Small Business. But, let me ask you... what do you know about double entry accounting? If nothing, you need to learn about debits and credits. Do a google search for double entry accounting and choose a site with a tutorial.

Aren't these products follows US GAAP? does singapore also follows US GAAP or it has its own accounting practices?

Moreover, do I need to follow IFRS (may be at a later date)?

They are close enough that any old package will do. And really, following any practice is about setting up the correct chart of accounts and properly characterizing your transactions. Your CPA handles the details.