Knowledge Hub

What is GST?

Goods and Services Tax (GST) is an indirect tax that replaced multiple cascading taxes levied by the central and state governments. It's a comprehensive, multi-stage, destination-based tax levied on every value addition.

Who Needs GST Registration?

• Businesses with annual turnover exceeding ₹40 lakhs (₹20 lakhs for special category states)
• Service providers with turnover exceeding ₹20 lakhs (₹10 lakhs for special category states)
• E-commerce operators and sellers
• Inter-state suppliers (regardless of turnover)
• Casual taxable persons
• Input Service Distributors (ISD)

Documents Required

• PAN Card of the business/proprietor
• Aadhaar Card
• Proof of business registration (Partnership Deed/Incorporation Certificate)
• Address proof (Electricity bill, Rent agreement)
• Bank account statement/Cancelled cheque
• Digital Signature (for companies and LLPs)

ITR Forms at a Glance

Key Deadlines

• Individuals (non-audit): July 31st
• Businesses requiring audit: October 31st
• Revised return: December 31st of assessment year

Understanding GAAP

Generally Accepted Accounting Principles (GAAP) is the set of accounting standards used by US companies. It's more rules-based compared to the principles-based IFRS used globally.

Key Differences

Why Delaware?

Over 60% of Fortune 500 companies are incorporated in Delaware. Here's why:

• Business-friendly laws: Delaware's Court of Chancery specializes in corporate law
• Privacy: Directors and officers don't need to be listed publicly
• No state income tax: For companies operating outside Delaware
• Flexible corporate structure: Easy to raise capital and issue stocks
• VC preference: Most investors prefer Delaware-incorporated companies

Delaware vs California vs Wyoming

Understanding US Payroll

US payroll involves calculating employee wages, withholding appropriate taxes, and ensuring compliance with federal, state, and local regulations. It's more complex than many other countries due to multi-jurisdictional requirements.

Key Payroll Taxes

Important Forms

• W-4: Employee's Withholding Certificate
• W-2: Wage and Tax Statement (annual)
• 941: Quarterly Federal Tax Return
• 940: Annual Federal Unemployment Tax Return
• I-9: Employment Eligibility Verification

What is Sales Tax Nexus?

Nexus is the connection between a business and a state that requires the business to collect and remit sales tax. After the 2018 South Dakota v. Wayfair decision, states can require out-of-state sellers to collect sales tax based on economic presence.

Types of Nexus

State Thresholds (Common Examples)

Employee vs Independent Contractor

Misclassification of workers is one of the most common IRS audit triggers. Understanding the distinction is crucial for compliance.

Key 1099 Forms

• W-9: Collect from contractors before payment
• 1099-NEC: Report payments of $600+ to contractors
• 1099-MISC: For rent, royalties, and other payments

Important Deadlines

• January 31: Send 1099-NEC to contractors
• January 31: File 1099-NEC with IRS
• February 28: File 1099-MISC (paper) with IRS
• March 31: File 1099-MISC (electronic) with IRS

A CPA-level, founder-friendly explanation of why month-to-month bookkeeping is critical for a C-Corp — not just "good practice", but essential risk control.

1. IRS & Audit Readiness

C-Corps file Form 1120. The IRS expects complete, traceable, and timely records.

Monthly books reduce:

• Missing expenses
• Unsupported deductions
• Audit red flags

2. 1099 & Payroll Compliance

1099 reporting is based on payments made, and payroll taxes are time-sensitive.

Monthly tracking ensures:

• Correct contractor totals
• Backup withholding compliance
• No missed filings or penalties

3. Cash Flow Control (Founder Survival)

C-Corps fail due to cash mismanagement, not lack of revenue. Monthly books show:

• Burn rate: How fast you're spending
• Runway: How long your cash will last
• Vendor obligations: What's due and when

4. Investor & Board Expectations

Investors and board members expect monthly financial reports:

• Monthly P&L (Profit & Loss)
• Balance Sheet
• Cash Flow Statement

5. Expense Deduction Protection

IRS allows deductions only if expenses are:

• Ordinary
• Necessary
• Properly documented

Monthly bookkeeping keeps:

• Receipts matched to transactions
• Categories accurate
• No last-minute assumptions

6. Sales Tax & State Compliance

Many states require:

• Monthly or quarterly filings
• Accurate taxable vs non-taxable splits

7. Fraud & Error Detection

Monthly review catches issues early:

• Duplicate payments
• Unauthorized charges
• Vendor billing errors

Summary: The Monthly Bookkeeping Checklist