#startup
Essential accounting and finance guidance for startup founders
Sole prop is the default, LLC is the wrapper, S-corp saves SE tax above ~$80K but needs payroll, C-corp is the venture clock — and converting the wrong way can be a taxable liquidation.
Under ASC 606, usage-based revenue is recognized as customers consume the service — not when they pay. How the stand-ready obligation, variable consideration, and the right-to-invoice practical expedient apply to metered API and SaaS pricing, with journal entries for prepaid credits, overages, and unbilled receivables.
FASB's ASU 2024-04, mandatory for fiscal years beginning after December 15, 2025, defines a three-part test for whether settling a sweetened convertible-note conversion counts as an induced conversion (expense only the sweetener) or a debt extinguishment (gain or loss against carrying value) — a classification that can swing reported expense by hundreds of thousands of dollars on the same transaction.
On February 27, 2026, the Delaware Supreme Court's Rutledge v. Clearway ruling upheld the 2025 SB 21 amendments to DGCL Section 144, confirming a safe harbor for related-party deals — including founder bridge loans and insider SAFE participation — approved by disinterested directors or a majority-of-the-minority vote. Here's what founders must document to qualify.
FASB's ASU 2025-12 clarifies that a net loss does not automatically make options, warrants, and convertible notes antidilutive: companies must test the combined numerator-and-denominator effect, apply the fix retrospectively to all prior periods presented, and adopt it for annual periods beginning after December 15, 2026.
The FTC's 2026 Clayton Act Section 8 thresholds are $54,402,000 in capital, surplus, and undivided profits and $5,440,200 in competitive sales. With regulators now counting board observers, investment funds, and LLCs, here is a practical checklist for VC- and PE-backed boards to spot illegal interlocking directorates.
Effective January 1, 2026, Texas SB 2206 raises the R&D franchise tax credit from 5% to 8.722% (10.903% for university-partnered research), makes it refundable in cash for businesses under $2.65M revenue and new veteran-owned businesses, aligns definitions with federal Form 6765, and repeals the R&D equipment sales tax exemption.
FASB's ASU 2025-12 (Issue 10) codifies a third method for retiring repurchased shares — charging the full excess over par value to additional paid-in capital, as long as APIC stays non-negative. Here is how the APIC-only, retained-earnings-only, and allocation methods change the balance-sheet impact of a co-founder buyout, and why the choice matters for loan covenants and dividend capacity before the December 15, 2026 effective date.
FASB's ASU 2026-01 requires PIK dividends on equity-classified preferred stock to be measured at the stated contractual rate — not fair value — effective for annual periods beginning after December 15, 2026, with early adoption permitted. Here's what venture-backed startups with PIK preferred provisions should do before their next audit.
Before a Series A term sheet arrives, founders should check three specific cap table failure points — a pre-money option pool shuffle that dilutes only founders, missing or over-vested founder equity, and stacked SAFEs with unmodeled conversion terms — each of which can delay or derail a raise.
A first-year SOC 2 Type II report for a 10–50 person SaaS company typically costs $25,000–$80,000 total, with the audit fee itself covering only about 40% of that — internal labor and readiness work make up the rest.
LLM inference is a variable cost of delivering your product, not software overhead — ICONIQ's 2026 data puts AI product gross margins at a 52% industry average, well below the 70-80% typical of traditional SaaS.
