Checklist for the Sale of a Business
December 13, 2017

Checklist for Newly Formed Entities

As a sizable but growing CPA firm, I like to think that we’ve cut out a unique place for ourselves in the market.

We enjoy working with clients that share a common vision of developing saleable, future equity value.  Inherently, this means that in addition to our work with mature, privately held companies as well as companies with securities registered with the SEC, we work extensively with bootstrapped, growth-oriented entrepreneurs and clients with funding from varied sources such as angels, venture investors, and private equity.  This has put us in a unique class of CPA firms and has positioned us as not just another regional CPA firm, but rather as a firm that is viewed as a true alternative to the Big 4 and national firms.

Why is all of this important?  Because when newly formed entities come to MFA, they often lack

sophisticated senior level financial support (that they desperately desire though!).  They come to us with numerous questions in their quest to get the fundamentals in place and position themselves for future growth.  As such, I’ve developed this abbreviated checklist of considerations to address the most frequently asked questions I receive from bootstrapped businesses looking to “getting it right”.



  • If your attorney hasn’t already done this for you, secure a federal identification number from the IRS,,id=102767,00.html.
  • You should establish a corporate bank account and consider which officers are authorized to sign checks.
  • Most will already have this covered, but it’s important to consider the company’s budget and working capital needs (also, see the bullet below regarding CFO-level support for the company) … always know the current cash position and requirements of your business!
  • Books and accounts – determine who will handle your bookkeeping and set up an accounting system. Because we get so many questions on this, here are a few top of mind thoughts to consider:
    • Yes, Quickbooks is imperfect from an accountant’s point of view given its inherent lack of internal controls, but it meets the early needs of most organizations and in my experience is the most popular choice. There are other options out there though, so before you buy or commit to anything read the next bullet and consider the input of others that you trust.
    • Unless you already have someone on staff to do the bookkeeping, consider engaging the services of a bookkeeper on a contract basis. There are many options out there and MFA can help with referrals to qualified professionals if necessary.
    • A bookkeeper can get the day-to-day details done for you, but for higher-level assistance (think things like development of the business model, pricing models, cash flow projections, fund raising, Board interactions, etc.), you’ll want a CFO even though the reality is you probably can’t afford one. There are a number of cost-efficient CFO solutions available on a contract / part-time basis that MFA can introduce you to.  I encourage you to explore this option sooner rather than later.
  • Do you understand the tax implications of the entity structure you are using for your business? Did you incorporate or form the entity as an LLC or LLP?  Do you plan to file an S-election with the IRS?  My advice here is to understand what your options are and the implications associated with each — before and after the formation of your company.
    • Another point to consider regarding taxes … just because you’re an early stage start-up running up losses doesn’t mean you can ignore good tax planning. Strategies to maximize future use of net operating losses and tax credits (i.e., research and development credits, etc.) should be considered early in a company’s life cycle.
  • It may be tempting to save a few dollars and do your own payroll, but the fiduciary implications of errors can be egregious. I always suggest engaging the services of a qualified payroll service provider to help you get this aspect of the business right.
  • Consider whether additional registrations / filings are necessary for other taxing and regulatory bodies such as other states or countries that you might have employees or customers in.
  • Whether hired help qualifies as an independent contractor or an employee can be a very tricky question, especially in certain states like Massachusetts. It’s tempting to assume most early hires, many of whom are often only working part time during the formative years of a business, can be treated as an independent contractor.  Don’t assume!  Consider and address this issue early on with your corporate tax advisor.



  • Most of our clients have equity incentive plans (i.e., a stock option plan or profits interest plan). Have you adopted a formal plan?  If not, contact your attorney before promising grants of equity to employees.  Not only should you have a plan in place, but you need to properly communicate equity grants to employees – such communication can be nuanced and should be addressed by both your attorney and corporate tax advisor, so be sure to speak with them both to fully understand the business and tax implications of equity grants to employees and others.
  • Just as important as putting an equity incentive plan in place, though, is the need to answer the question of the price at which you will grant such equity to your employees. Long gone are the days when the Board of a private company can arbitrarily set the fair market value of the company’s equity for grant purposes.  The Internal Revenue Code Section 409A helped change that, as did the financial reporting requirements.  In short, you’ll want to engage the services of a qualified valuator before issuing grants of equity.  This is an area where MFA can be of assistance.



  • Do you have the appropriate insurance coverage in place? It is easy to over-insure risk if you don’t know what you’re insurance objectives are.  I often suggest that young entrepreneurs speak to a few different insurance professionals to gather viewpoints and opinions.  In general, though, you should at least be thinking about the following:
    • Officer and Director liability
    • General liability
    • Fire and premises
    • Business Interruption
    • Product liability (if you have any product yet)
    • Crime
    • Auto (if the business has any)
  • Health insurance … this is a sore subject these days with many, but a necessary consideration. It can also be a minefield, so seek out professional guidance and get a plan in place that makes sense for the business, its employees, and the demographics of the employee base.



I’m sure there are a great many more things that could be included herein and I’m interested to hear your thoughts.  Please feel free to add them to the comments section below, and I’ll incorporate them into an updated version of this checklist at a future date.

On a final note…. bear in mind, this is my checklist and is only meant to provide general information.  This information is merely general guidance and it is not a substitute for professional advice.  It should not be acted on without obtaining professional advice tailored to your company’s individual needs.  If you have substantive questions, you are encouraged to consult your advisor at MFA and/or your attorney.




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