Tell me more ×
Answers OnStartups is a question and answer site for entrepreneurs looking to start or run a new business. It's 100% free, no registration required.
up vote 1 down vote favorite

I have heard several times that the Sarbanes–Oxley Act had a profound affect upon how business is performed in the US, but no one has ever explained to me what all the fuss is about. Can you? How, in particular, does it affect a start-up company?

share|improve this question
1  
SOX relates to public companies and not startups so this isn't a good place for this question. – user6603 May 19 '11 at 13:19
Really? I thought it was pertinent. After all, I don't want my startup to be a startup forever. – John Berryman May 19 '11 at 14:38
2  
I think that clearly this is not a "start-up" question @John Berryman -- but it is a darn tootin good question, especially for this board with a slight edit. There are some impacts on start-ups of the Sarbanes-Oxley Act. Why not ask that question? – Joseph Barisonzi May 19 '11 at 15:55
Ok then, I'll bite. – John Berryman May 21 '11 at 0:45

2 Answers

up vote 1 down vote accepted

Senior management of publicly-reporting companies has to certify that the financial statements are correct now, due to Sarbanes-Oxley. This requires massive audit expenses (to be sure that the financial reports are right), and there is significant liability for those executives if the financial reports are wrong. So a public company can either spend a ton of money on audits or not be public. It's a lose-lose situation.

share|improve this answer
Although I understand the distinction between a start-up and a public company (see discussion in question comments), I really want my start-up company to become public at some point! I think this is the answer I was looking for. – John Berryman May 22 '11 at 13:03
up vote 2 down vote

It depends on the types of services you offer and who uses those services. As a start-up it's easy to think this is N/A for you but if any of your clients are publicly traded or use your products/services as part of their work for their clients who are publicly traded you may find that this impacts you as they will be asking for things like audit-trail capabilities, etc.

share|improve this answer
+1 for answering from the viewpoint of a startup. – Kenneth Vogt May 21 '11 at 16:35

Your Answer

 
discard

By posting your answer, you agree to the privacy policy and terms of service.

Not the answer you're looking for? Browse other questions tagged or ask your own question.