how to

How to Achieve Cap Table Success

If you’ve ever started a business or invested in a business then you probably know the importance of a cap table. As a quick refresher, a company’s cap table is a spreadsheet that shows how the ownership of the company is divided among the founders and investors. Basically, it says who owns what percent of the company.

As a founder, the cap table plays a crucial role in growing your personal wealth. It holds the key to how much you get when it’s time to cash out on the business. Even if you start and grow a business worth millions of dollars, you could receive very little in the end if you don’t manage your cap table well.

Taking care of your cap table and making smart ownership decisions should be just as important to you as building a great company. Here are 3 tips to help you accomplish cap table success.

Start Early

Too often we hear about entrepreneurs that are so excited about starting their business that they forget the importance of organizing their cap table.  Soon enough they have to face the reality. As the company grows, everyone involved begins to shuffle for a piece of the pie.

If ownership hasn’t been worked out beforehand, this can lead to drama and legal issues. As soon as you begin your company, it’s important to start thinking about how to divide ownership fairly. Organize a cap table and record these decisions early on to avoid future headaches and to position your company for long term success.

Record everything

Accurate record keeping is essential for your cap table. The last thing you want on your cap table is an error.

Any error on your cap table will end up costing you, one way or another. From legal fees to incorrect allocation of money, these errors are better just to avoid all together.

You need to track every single transaction on your cap table. And as stated above, make an effort to do this from the very beginning. This might seem obvious, but you’d be surprised at how many cap tables have errors. Sometimes it’s a math error, other times there is information that is inaccurate or simply missing.


In the past, there were pretty much only two options for managing your cap table. You could either hire expensive lawyers and accountants to do it for you, or you could try to do it yourself.

It may seem easy enough to handle your cap table by yourself. There are definitely some great spreadsheet templates out there to get you started. But even these are very limited.

As your company and cap table mature, it will become too complicated for a spreadsheet. You will need to keep track of option exercises, cancellations, terminations, sales, transfers, and more. Frankly, it becomes messy and time consuming, and there is greater room for costly mistakes.

Luckily, we live in a world of user-friendly business automation software, and that includes cap table management. Now there is handy software with expert support, such as Capshare, to help you keep management of your cap table under your fingertips without being left in the dark.


Your cap table needs to looked after with the same care that you give your growing company. Maintaining a cap table may seem like a daunting challenge, but it doesn’t have to be, due to helpful software. Don’t delay getting started or recording important transactions. Keeping up with your cap table now will lead to less problems down the road and a larger payoff in the end.

Where Should I set up my Business?

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Where should I set up my business?

Now that you have decided to form an LLC or Corporation, the next step is to determine to either set it up in your home state (physical location) or choose another state. This is a decision you should not make lightly or do it because "someone" said it was a good idea without investigating how it will effect you and your business specifically. 

For most small businesses there are two factors to considered when deciding where to form your LLC or Corporation: 

  • Cost of forming in your home state vs. the cost of forming in another state and foreign registering to do business in your home state. 
  • Taxation & Requirements of both states of registration.

1. Home state incorporation vs. foreign registration

If your business is owned by one or a couple members/shareholders and its primary business activity is conducted within your home state it is typically most efficient to register in your home state. This is usually more cost effective than registering your entity in another state and then registering as a foreign entity to do business in your home state. 

2. Requirements and taxation

Before registering in a foreign state it’s a good idea to research that state’s ongoing business requirements as well as general state taxation requirements. A company that foreign registers to do business in another state is subject to filing taxes and annual report fees in both states. 

Another factor to be aware of is the potential of litigation in each state you are registered to do business in.

Audited? Don't Panic! Here's How to Handle it.

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Nothing strikes fear into the hearts of small business owners quite like the a-word. Whether it’s the IRS or state taxing authorities, having someone tell you they want to audit your records is a fraught time even for the most organized business owner.

You think you filed your tax returns correctly, but what if you made a mistake? Could you have to pay a huge penalty? Could you even go to jail? 

Unfortunately, small business owners are a bit more likely to be audited than the general public because they self-report info on the Schedule C. It’s tempting to panic when you see the word “audit” but don’t. Just like with many big, bad boogeymen, this one isn’t as scary as it seems once it knocks on your door. 



Think of an auditor as a man in a black suit and dark sunglasses whisking you away to a non-descript office complex to go over your entire life? Believe me! It isn’t as bad as all that. 

In fact, the vast majority of audits are carried out via the U.S. mail. In fact, the IRS will never call or email you, so if someone claiming to be from the agency contacts you in any form other than a letter, be wary. 

If you do get a letter, keep in mind that most times, the IRS is only auditing a portion of your tax return. That said, read the letter carefully. In most cases, the IRS simply wants clarification on one part of your tax return. Once you have answered their request they will let you know in writing what they’ve decided, and you even have a chance to appeal. See, that wasn’t so scary? 

Gather Documentation 

If the IRS or your state’s taxing authority comes calling, be prepared to back up your tax claims with documentation. If the audit is mileage related, for example, be prepared to show an auditor your mileage log. 

Do be careful about what you show an auditor. Only give them enough information to answer the question they asked. If you offer up more information, such as your whole “Taxes 2012” file, they are allowed to expand the scope of the audit. And nobody needs more trouble!
From there, be sure to send in any requested documentation by the deadline listed on your letter. 

Watch for Red Flags

If you must meet with an auditor, do not meet with him or her at your home. Instead request to meet at a local tax office or even, if you have retained one, your tax attorney’s office. 

Before you meet the auditor, know your Taxpayer’s Bill of Rights. If you feel at any time like the audit is going badly, you can request to pause and consult with an attorney. If the auditor mentions serious crimes, such as “tax fraud” then it’s in your best interest to consult an attorney. Fortunately, when you’re a small business owner simply trying to do the right thing you likely won’t run into such a dire predicament.