Why Your Startup Needs to Share Its Cap Table with Your CPA

As a startup founder, you may be hesitant to share your cap table with others. A cap table, or capitalization table, is a document that shows the equity ownership and capitalization of a startup, including the total value of the shares, total number of shares, the number of shares owned by individual investors, and the percentage of ownership each investor holds. However, there are a few good reasons why you should share your cap table with your certified public accountant (CPA).

First, your cap table needs to be reconciled. By giving your CPA access to your cap table, they can review and reconcile it if necessary. This is important because it allows your CPA to check that all the money you were supposed to receive from investors has been captured in your financial system, such as QuickBooks. This helps ensure that there are no discrepancies that could lead to embarrassing situations later on.

Second, tax agencies need ownership breakdowns. Almost every tax agency requires a breakdown of ownership percentages for institutions and specific shareholders, including founders and large shareholders. This information is needed for federal and state tax returns, as well as for municipal filings. Without access to your cap table, your CPA may not be able to provide accurate tax filings.

Finally, providing real-time access to your cap table is the best option. While it is fine to provide an export of your cap table once a year, it is better to provide access to a cap table management software like Carta. This allows your CPA to see changes in real-time and avoid any discrepancies that could arise from an out-of-date cap table.

In conclusion, while it may be natural to be hesitant to share your cap table, it is important to remember that your CPA needs access to it for a variety of important reasons. By giving your CPA access to your cap table, you can ensure that your financials are accurate and that your tax filings are done correctly. Additionally, providing real-time access to your cap table allows your CPA to see the changes in real-time and avoid any discrepancies that could arise from an out-of-date cap table.