
CEO Cost Amicus $500k - wwwdonohue
https://www.teampay.co/blog/how-amicus-lost-500000/
======
tptacek
Payroll tax withholding problems are the scary story adult founders tell
younger founders to keep them up at night. Every group of operator friends I
have has a collection of stories about this. Get an accountant before you hire
your first W2 employee, and use a payroll service.

Just the idea of trying to operate as a director/partner at a startup without
an accountant gives me the willies. It's mindboggling to think people actually
wing it past the point where they're making payroll.

~~~
MattRogish
Always always always use a payroll provider. If possible (size permitting) use
a PEO (JustWorks, TriNet, etc) to take care of payroll taxes and state/local
unemployment registration/withholding etc. (especially if you are distributed
and you have folks in many states). Getting this wrong can destroy your
company, and PEOs are super cheap by comparison!

~~~
markbnj
Absolutely agree with this. They have software that accurately takes care of
so many fine details and at such a reasonable per-employee price point that
you would have to be nuts not to use one as a small company. In fact it makes
me believe Bannon just didn't give it much thought.

------
nlh
I'm going to build on a common HN adage:

1) Don't roll your own crypto;

2) Don't maintain your own SMTP server; and..

3) Don't do your own payroll.

There are LOTS of things you can try to do yourself as an entrepreneur (some
are easier than others), but I think this is a handy list. It boils down to
risk vs. cost. The cost of outsourcing the three of these is relatively small
-- the cost of screwing any one of them up is massive.

~~~
walrus01
2) Unless you are an ISP, in which case you might use office365 or similar for
company email, but you absolutely need to know _how_ to properly do your own
SMTPd.

------
CamelCaseName
People here are quite harsh on Seth Bannon.

He is a prolific poster on HN, whose comments and articles often have pretty
good insights.

Yet every time I read about his history, I just ask, why? So many of his
choices and risks seem so reckless. Is he truly foolish? Or are we the
beneficiaries of hindsight, of stress free decision making, ungrounded in the
day-to-day reality of running Amicus?

I think the latter is closer to the truth. Meeting him in real life, I
realized he was just as sharp in person as on paper. (Also very good at Catan.
Damn you Seth.)

And talking with Seth was one of the conversations that helped me to get
started on my business, which should break $200K in sales this year.

From what I know about his current startup investments, I think the headlines
will be a lot kinder to him in the years to come.

Seth has ample ambition, and when someone with ambition finds an opportunity
they want, but lack the credentials for, they'll fight for it regardless.
Seth's mistake was thinking others were the same.

~~~
sethbannon
Thanks so much for the empathetic and kind comments. And I'm so happy to hear
I played a small part in your business! I'd love to hear more.

For those that don't know, as a first time founder and CEO I made a large
number of mistakes I wish I hadn't. In retrospect, they seem bone headed but
none of it was clear at the time. I wrote about those mistakes so others might
avoid making them [1]. Unfortunately that blog post has been turned into a
couple takedown pieces at my expense. Such is life.

1: [http://sethbannon.com/mistakes-you-should-never-
make](http://sethbannon.com/mistakes-you-should-never-make)

~~~
oldManRiver
Don't worry about it man, everyone fucks up.

I'm on startup #8 and I've learned something at all the prior jobs and
startups to do and not to do.

Experience is sometimes learned the hard way, being a hardheaded person
myself, this is my preferred course :-)

------
derekp7
If you are an employee of a startup, please make sure to check on ssa.gov to
make sure they are receiving your payroll taxes. Because if the startup isn't
paying them, and they go bust, this will reduce your social security income at
retirement time.

I don't know if there is a way to get up to date info, but you can at least
catch it after year end. And if you do find a dependency, bringing it up early
to your employer could end up saving them too.

~~~
misiti3780
Second this - I had this happen to me, although the founder was lying to me
saying he was paying them - after we discovered he was a shithead, I reported
him to the DA and 4 years later (last friday) he plead guilty to 2 felonies
and has to pay us all back.

I wish i had been more careful to start with.

------
csours
>According to Bannon, Amicus’s back taxes, interest and penalties, and legal
fees cost the company over $500,000.

Ok, so how much of that was just back taxes? They would have had to pay those
anyway, so you can't really count those the same as a penalty.

$500,000 - (back taxes) = actual losses due to negligence.

Now compare the actual losses to the salary for a CFO. If the CFO cost more
than the losses, Amicus still came out ahead.

I am not advocating for negligence, but you should always look for point of
view bias in articles like this.

~~~
mmt
Indeed, I couldn't help but think the title was clickbait, once I read that
part of the article.

The charts toward the start suggest the penalty maximums are 15% + 25% (the
article mentions a 100% penalty which was avoided).

That would make 500k 140% of the back taxes, which means the penalties are
only $143k.

Crunchbase shows the first funding in Feb 2012. The accountant started in
2014. That's under $72k/year.

"Lack of CFO costs Amicus $72k/year" wouldn't be much of a headline, though.

------
tlrobinson
This seems like just a rehash of Seth's own blog post:
[http://sethbannon.com/mistakes-you-should-never-
make](http://sethbannon.com/mistakes-you-should-never-make)

------
twunde
Ah this brings back memories. I'm honestly blown away that Amicus only had
3.2M in funding. They consistently got a ton of press (they had at least 2
stories in Techcrunch in 2012 and I remember Seth doing a photoshoot in the
General Assembly office). It was also one of a few companies I saw self-
combust out of GA, at least this one has become a public cautionary tale ala
Knight Capital. Hopefully Topper is doing well

------
nyrulez
"Bannon pretty much ran the company single-handedly".

I am not following: if he was the only person running the company, how did
payroll taxes get so large ? Was it for his own pay? The article neglects what
the taxes are for which would have been helpful.

~~~
compiler-guy
By "running the company" the article means, the company's management. There
were many more employees.

~~~
nyrulez
Thanks. Including the principal amount for these taxes + number of payroll
entities would have been nice - I am trying to get a sense of the relative
proportions of these employment taxes vs actual pay.

~~~
mikenyc
[https://en.wikipedia.org/wiki/Payroll_tax#United_States](https://en.wikipedia.org/wiki/Payroll_tax#United_States)

The article is just content marketing, sensationalizing a mistake made by an
extremely small, early stage startup as a marketing ploy to lead you to the
conclusion you should buy this company's software to avoid a similar fate. So
not surprising it's light on details. For what it's worth, startups at that
stage almost never have a CFO nor any admin/accounting staff. That said,
obviously it was a mistake and they should have paid their payroll taxes. But
the sentiment in this piece is crafted solely to lead the reader to the
conclusion that they should pay for this company's software.

~~~
dumbfounder
Content marketing is content and marketing, not just marketing, and in this
case the content is a good warning to others. Yes, they are trying to sell
their product, but they are making a good point, and they aren't shoving their
product in your faces. I think you are being hard on them for no good reason.

~~~
mikenyc
Startups are hard and early stages are _always_ messy. If the piece was
journalistically motivated I'd feel differently, but as a marketing post I
don't love the vibe. Just my two cents.

~~~
CPLX
Yeah sorry I disagree.

I really don't think it's possible for there to be too many articles telling
startup founders not to fuck up payroll withholding. It's that important.

------
toast0
It's not clear how much of that is penalties and how much was the original
amount unknowingly owed. The CEO didn't really cost the company the original
amount, he just was unaware of it (and may have made different choices if
aware)

------
bacon_waffle
Just a friendly reminder that payroll tax is not inherently hard, though US
payroll tax may be.

Down here in New Zealand, for instance, it's quite reasonable to manage
payroll for a smallish company yourself. There are some services/tools which
people seem to like too.

In the case of an employee without student loans nor child support payments:
once a month, the employer submits some information and pays tax to IRD,
usually online. Inputs are the employee's gross income, their IRD number, and
the contribution rate to their KiwiSaver (retirement plan). Outputs are
effectively four numbers: pay the employee $A, send the IRD $B, and then the
company needs to record two other amounts which relate to KiwiSaver. Manually
dealing with the last two bits may even be obsolete - there's a new process
available now, but I haven't switched to it yet.

This online calculator shows most of the work required
[https://www.ird.govt.nz/calculators/keyword/kiwisaver/calcul...](https://www.ird.govt.nz/calculators/keyword/kiwisaver/calculator-
paye.html)

Income tax is also quite easy from the employee's perspective: decide how much
to contribute to KiwiSaver (usually when you start the job), do your work, and
receive your pay. There's no annual tax return to file for most people, as the
right amount of money shows up in the right places.

------
klinskyc
Was it normal in 2012 to not use a payroll company? This has become a non-
issue due to companies like Gusto or Justworks.

~~~
mark212
ADP has been around since 1949 [1] and handles even single-employee
businesses. It's far more of a value when you scale to 10+ as I recall, but
even their one person pricing is far cheaper than this IRS debacle here. Don't
forget that if you're a California-based startup, you likely have to file with
the state agencies, too -- and that system is so byzantine it'll make you
relish the time spent with the IRS forms.

Better still would be to call up any random bookkeeper from the local area.
Payroll is ridiculously easy for those who know how to do it and is well
within the competency of even a bad bookkeeper.

Just remember to always sign all the checks, no matter how small, and look at
the bank statements every month. It'll take maybe 20 minutes a week and saves
so much hassle and money later.

[1]
[https://en.wikipedia.org/wiki/Automatic_Data_Processing](https://en.wikipedia.org/wiki/Automatic_Data_Processing)

------
nutjob2
This is just plain incompetence, up and down the line.

Any idiot can google this stuff and find out exactly what he needs to do
within an hour.

~~~
ajiang
Honestly I wouldn't downplay complexity of this stuff. Anyone can Google one
item, but there are hundreds of items you need to stay on top of. Missing one
could mean a massive liability.

The takeaway should be that if it is not your forte, outsource to an expert or
spend a lot of time on it to make sure you get it right.

~~~
dumbfounder
Yeah, you don't know what you don't know. You are going to miss something if
it isn't your main focus and you are not experienced. Outsourcing this stuff
is cheap, you just plain gotta do it at that level.

~~~
stickfigure
If you have employees, "payroll taxes" are such an obvious concern that nobody
can possibly claim ignorance. And there are a zillion startups out there that
will automate payroll for you - it really makes no sense to DIY it.

I'm going with incompetence.

------
rch
It's not hard to find people who could fill the CFO role early on, but it can
be hard to decide whom to trust.

~~~
zrobotics
Thing is you don't necessarily need a CFO early on. What you do need, though,
is an accountant. Even ignoring possible financial penalties, the cost is low
enough that it is likely a net financial positive. A founder unfamiliar w/
accounting will spend longer trying to accomplish the same tasks, and is
wasting time that could more productively be spent elsewhere.

How did nobody balance the books at all in 3 years? He states: "... I thought,
Bank of America’s payroll system automatically withholds payroll taxes every
month, it’s all automated. But it wasn’t. There was a single “submit tax”
button in a separate part of the Bank of America website that had to be
clicked to actually pay the taxes."[0]

Any even semi-competent bookkeper would have noticed this.

[0] [http://sethbannon.com/mistakes-you-should-never-
make](http://sethbannon.com/mistakes-you-should-never-make)

------
petercooper
Unfortunately it seems their security certificate also lapsed 8 days ago -
[https://amicushq.com/](https://amicushq.com/) ?

------
tomasien
Thank god for Justworks and Gusto

