# What a back office is, and who does what

> The back office keeps the record, pays and collects, runs payroll and files. Founders can hand off the work, but the company stays responsible.

Source: https://lopifi.com/learn/what-is-a-startup-back-office
Part of: Lopifi — US GAAP books on autopilot, checked by a CPA (https://lopifi.com)

---

**What does a startup back office do, and who does each part of it?** The back office keeps the record, pays and collects, runs payroll and files. Founders can hand off the work, but the company stays responsible.

A company's front office sells: product, marketing, the people a customer talks to. The **back office** is everything that makes the selling count. It keeps the record of what happened, pays what the company owes, collects what it's owed, runs payroll, files with the government and keeps the cash honest. Nobody buys from a startup because of its back office, and plenty of startups have lost a round, a bank account or a key hire because theirs was a mess.

> Background reading on the term. The work it names is set by the rules each later lesson cites.

— [Wikipedia, “Back office”](https://en.wikipedia.org/wiki/Back_office), Back office

## Seven jobs

| Job | What it produces | How often | Track |
| --- | --- | --- | --- |
| Keep the books | A [general ledger](https://lopifi.com/md/glossary/general-ledger) that ties to the bank, and a monthly [Close](https://lopifi.com/md/glossary/close) | Every month | [Accounting](https://lopifi.com/md/learn/accounting) |
| Plan the cash | Burn, runway, a budget and the board pack | Every month | [Finance](https://lopifi.com/md/learn/finance) |
| Own the cap table | Who owns what, and every raise recorded | Each grant and round | [Cap tables & raising](https://lopifi.com/md/learn/equity) |
| Pay people | Paychecks, tax deposits, quarterly and annual returns | Every payday | [Payroll](https://lopifi.com/md/learn/payroll) |
| Pay bills | [Accounts payable](https://lopifi.com/md/glossary/accounts-payable): approved bills paid on time | Every week | [AP](https://lopifi.com/md/learn/ap) |
| Get paid | [Accounts receivable](https://lopifi.com/md/glossary/accounts-receivable): invoices collected | Every week | [AR](https://lopifi.com/md/learn/ar) |
| File and pay taxes | Federal and state returns, franchise tax, 1099s | On the calendar | [Compliance & tax](https://lopifi.com/md/learn/compliance) |
| Offer benefits | Health and retirement plans, and their filings | Each plan year | [Health & benefits](https://lopifi.com/md/learn/benefits) |
| Claim the research credit | Form 6765, and the payroll tax offset | Each tax year | [R&D tax credit](https://lopifi.com/md/learn/rd-credit) |

The back office as a founder meets it. Each row is a track in this course; the [Entity types](https://lopifi.com/md/learn/entities) track sits under all of them.

## Who does what

Founders rarely do all of it themselves, and they shouldn't. But the people they hire for it have different jobs, and the titles get used loosely. A bookkeeper isn't a CPA, a fractional CFO isn't either, and a payroll provider isn't the employer.

| Role | What they do | What they don't do |
| --- | --- | --- |
| Founder | Owns all of it. Approves spending, signs returns, answers for the numbers to the board and the IRS | Hand off the responsibility. The company is the taxpayer and the employer whoever does the work |
| Bookkeeper | Records the transactions, reconciles the bank and cards, closes the month, keeps the AP and AR lists | Sign a tax return as preparer of record or give assurance on the statements |
| CPA (certified public accountant) | Holds a license issued by a state. Prepares tax returns, gives tax advice, and performs [compilations](https://lopifi.com/md/glossary/compilation), reviews and audits | Usually keep the day-to-day books. That's the bookkeeper's job, even at a CPA firm |
| Enrolled agent | Holds a credential from the IRS itself to represent taxpayers before it. Often prepares returns | Audit or review financial statements |
| Fractional CFO | A part-time finance lead: the model, runway, the board pack, fundraising diligence | Necessarily hold a license. It's a job description, not a credential |
| Payroll service provider | A [payroll service provider](https://lopifi.com/md/glossary/payroll-service-provider) calculates pay, withholds tax, deposits it and files the payroll returns using the company's EIN | Take on the liability. If a deposit is missed, the IRS comes to the employer |
| PEO, or certified PEO (CPEO) | A [PEO](https://lopifi.com/md/glossary/professional-employer-organization) co-employs the staff: runs payroll under its own EIN and often bundles benefits and HR | Become the employer for everything. A CPEO is treated as the employer for employment tax on the wages it pays, and the startup still directs the work |

The roles a startup back office is built from, in the order most companies add them.

— [Wikipedia, “Certified Public Accountant”](https://en.wikipedia.org/wiki/Certified_Public_Accountant), Certified Public Accountant

> “An enrolled agent is a person who has earned the privilege of representing taxpayers before the Internal Revenue Service by either passing a three-part comprehensive IRS test covering individual and business tax returns, or through experience as a former IRS employee.”

— [IRS, Enrolled agent information](https://www.irs.gov/tax-professionals/enrolled-agents/enrolled-agent-information), What an enrolled agent is

**Bookkeeper**
- Pro: Codes every transaction and closes every month
- Pro: Keeps the receivable and payable lists that billing and paying run on
- Con: Records and reconciles; doesn't give tax advice or assurance as part of the job
- Con: Needs someone to answer "what was this?" for each unclear transaction
- Best for: The monthly work, from the first month

**CPA**
- Pro: A state license, with the ethics and continuing education it carries
- Pro: Prepares the corporate return and can perform compilations, reviews and audits
- Con: Paid for expertise, so an expensive way to code routine transactions
- Con: Usually engaged at year end or quarterly, not week to week
- Best for: The tax return, tax questions, and statements someone outside will rely on

**Fractional CFO**
- Pro: Looks forward: the model, runway, budget against actuals
- Pro: Part-time, so the company gets the judgment without a full-time salary
- Con: A job description, not a credential
- Con: Works from the books, so it can't replace a bookkeeper
- Best for: A company planning a raise, a board pack or a hiring plan

The three people founders most often confuse, side by side.

*[Figure: cpa review]*

A quarterly CPA review of the bookkeeper's work. Illustrative figures.

The payroll rows are where founders most often get it wrong. A payroll provider files with your number, on your behalf, and the IRS is explicit about who answers when it fails.

> “If an employer is using a PSP to perform its tax duties, the employer remains liable for its employment tax obligations, including liability for employment taxes.”

— [IRS Pub. 15 (2026), §16 — Payroll service provider (PSP)](https://www.irs.gov/publications/p15), Outsourcing payroll does not outsource the liability

> “A CPEO is generally treated for employment tax purposes as the employer of any individual who performs services for a customer of the CPEO and is covered by a contract described in section 7705(e)(2) between the CPEO and the customer (CPEO contract), but only for wages and other compensation paid to the individual by the CPEO.”

> The exception is a certified PEO, and only for the wages it pays under its contract. A PEO that isn't IRS-certified doesn't carry it.

— [IRS Pub. 15 (2026), §16 — Certified professional employer organization (CPEO)](https://www.irs.gov/publications/p15), A certified PEO is treated as the employer for employment tax

— [Wikipedia, “Professional employer organization”](https://en.wikipedia.org/wiki/Professional_employer_organization), Professional employer organization

**Payroll service provider**
- Pro: Files and deposits under the company's own EIN
- Pro: Easy to switch: the payroll history is the company's
- Con: The company remains liable for the taxes, including a deposit the provider misses
- Con: Benefits are bought separately
- Best for: A company that wants to stay the employer and pick its own benefits

**PEO or certified PEO**
- Pro: Bundles payroll, benefits and HR administration
- Pro: A CPEO carries the employment tax liability on the wages it pays under its contract
- Con: Co-employment: payroll runs under the PEO's EIN, so leaving means moving payroll and benefits at once
- Con: Only an IRS-certified PEO is treated as the employer for employment tax, and only for the wages it pays
- Best for: A small team that wants payroll, benefits and HR in one contract

Two ways to run payroll without building it yourself.

> **You can hand off the work. You can't hand off the responsibility: the company is the employer, the taxpayer and the signer, whoever presses the button.**

**Wrong:** Our payroll provider handles the taxes, so a missed deposit is their problem.

**Right:** The provider deposits from Northwind's account under Northwind's EIN. Northwind checks each quarter that the deposits landed.

The provider is a service the employer bought. It is not liable as the employer, so a missed deposit is the employer's penalty to pay.

## Northwind's back office

**Northwind — Who does what at a two-founder company.** The founders approve and sign. A bookkeeper closes each month. A payroll provider runs pay under Northwind's EIN, and a CPA prepares the year-end return from the closed books. Nobody is a CFO yet; the founders read the monthly statements themselves.

Northwind Traders, Inc. was incorporated on September 1, 2026 by two founders. That's this course's company. It buys tools and resells them, and its first month is the book every track works from. Its back office is what most two-founder companies end up with: the founders approve and sign, a bookkeeper closes each month, a payroll provider runs pay, and a CPA prepares the year-end return. With two people you can still split the work so that one approves a payment and the other releases it. That's [segregation of duties](https://lopifi.com/md/glossary/segregation-of-duties) at its smallest, and investors will ask about it later.

The rest of Core walks the map in the order a founder meets it: [the company's numbers](https://lopifi.com/md/learn/ein-and-state-registrations), [its money](https://lopifi.com/md/learn/separate-business-and-personal-money), [its books](https://lopifi.com/md/learn/how-startup-books-work), [its people](https://lopifi.com/md/learn/hiring-employees-and-contractors), [its bills and invoices](https://lopifi.com/md/learn/money-in-and-money-out), [its calendar](https://lopifi.com/md/learn/startup-back-office-calendar) and [its records](https://lopifi.com/md/learn/how-long-to-keep-business-records). The choice between a payroll provider and a PEO, worked on Northwind's own payroll, is [its own Payroll lesson](https://lopifi.com/md/learn/payroll-provider-vs-peo).

## Where this lesson's rules come from

- [Wikipedia, “Back office”](https://en.wikipedia.org/wiki/Back_office) — Back office (reference)
- [Wikipedia, “Certified Public Accountant”](https://en.wikipedia.org/wiki/Certified_Public_Accountant) — Certified Public Accountant (reference)
- [IRS, Enrolled agent information](https://www.irs.gov/tax-professionals/enrolled-agents/enrolled-agent-information) — What an enrolled agent is (irs)
- [IRS Pub. 15 (2026), §16 — Payroll service provider (PSP)](https://www.irs.gov/publications/p15) — Outsourcing payroll does not outsource the liability (irs)
- [IRS Pub. 15 (2026), §16 — Certified professional employer organization (CPEO)](https://www.irs.gov/publications/p15) — A certified PEO is treated as the employer for employment tax (irs)
- [Wikipedia, “Professional employer organization”](https://en.wikipedia.org/wiki/Professional_employer_organization) — Professional employer organization (reference)

## Read further

- https://lopifi.com/md/startups/why-close-your-books-monthly
- https://lopifi.com/md/startups/audit-ready-books-before-series-a
- https://lopifi.com/md/accounting/cpa-review
- https://lopifi.com/md/accounting/close
- https://lopifi.com/md/docs/domain/08-controls-and-audit

- **Track:** [Back office core](https://lopifi.com/md/learn/core)
- **Lesson:** Lesson 1 of 9 — 8 min
- **Terms taught:** [General ledger](https://lopifi.com/md/glossary/general-ledger), [Close](https://lopifi.com/md/glossary/close), [Accounts payable](https://lopifi.com/md/glossary/accounts-payable), [Accounts receivable](https://lopifi.com/md/glossary/accounts-receivable), [Compilation](https://lopifi.com/md/glossary/compilation), [Payroll service provider](https://lopifi.com/md/glossary/payroll-service-provider), [Professional employer organization](https://lopifi.com/md/glossary/professional-employer-organization), [Segregation of duties](https://lopifi.com/md/glossary/segregation-of-duties)
- **Next:** [The entity and its numbers, Core · Lesson 2](https://lopifi.com/md/learn/ein-and-state-registrations)
- **The course:** https://lopifi.com/md/learn