How To Get Started with Bitcoin as a Business

Are you thinking of accepting Bitcoin as a form of payment for your business?

Do you want to hold (also known as hodl, it was a misspelling on a chat that took a life of its own) Bitcoin as an asset on your books?

This can be a daunting task. You will want to consult with different advisers on how to go about doing this, how to pay for it, how to deal with taxes, the legalities of holding it, how to secure it as a business, etc…

It can be as easy as using a Bitcoin wallet, having a customer pay for your goods/services with Bitcoin, and then hodling that Bitcoin forever.

But the reality is a bit deeper than this.

Accepting Bitcoin as a Payment

As Bitcoin payments become more mainstream, point of sale systems will adapt to accept Bitcoin as a payment. Currently the choices of software that accept both credit cards and Bitcoin payments are limited. Many make you choose one or the other. Some of the credit card enabled systems have a custom payment button that you can assign to Bitcoin, but would then have to open a Bitcoin wallet to create an invoice to be paid in Bitcoin. There are a few professional quality Bitcoin payment systems that offer a point of sale, such as BTCPay Server, but do not integrate credit cards. The point of sale and invoice management system, AlpacaRMS, is one system that offers both credit card payments and Bitcoin payments in one system.

Accepting Bitcoin as a payment also brings up the question of running a node and becoming self-sovereign as a business. There are many Bitcoin node providers including Start9, Umbrel, Voltage, among others. Start9 and Umbrel both offer a hardware platform. Voltage provides a managed software as a subscription product for running a Bitcoin node. All of them have their own benefits, and cost structures. Start9 offers a hardware bundle and a curated set of open-source software. Umbrel offers a hardware solution also and offers many software packages. Start9 differs from Umbrel in that Start9 promotes self-sovereignty through their curated open-source software, and with their curated choice of hardware vendors down to the chip level. While you may have upfront hardware costs here, and no subscription fees, you will have to manage your upgrades to keep your system up to date. That will include some administrative overhead that you will need to take into account. Voltage provides enterprise grade Bitcoin nodes quickly and you would pay for this service monthly or annually.

Terms of Service Policy Updates

You will need to have a policy on denominating in Bitcoin in regards to contractual obligations of a transaction between your store and the customer. This includes your Terms of Service for your website. Since Bitcoin is a volatile asset and method of payment, you need to decide on how you will denominate your transactions, and how you will pay out any refunds. This is important. If someone pays 100,000 sats two weeks ago (value US $59.11), and comes in for a return and refund, you will need a policy to determine how the customer is to be repaid. Without a policy, your customer might assume to be paid back in the currency that was paid in (1 bitcoin = 1 bitcoin). But if paid in Bitcoin, you and the customer could lose or gain value over the cost of the returned item based on the current rate of Bitcoin to the dollar at the time of the return. Using the example above, the customer comes in for a return when Bitcoin has appreciated in value and 100,000 sats is now $75, but the product was worth $59.11. The customer gains $15.89 in value if paid back in sats. Conversely, if the price of Bitcoin goes down, and 100,000 sats is now worth $49.11, the customer loses value of $10 for their $59.11 purchase. The argument here is with 1 Bitcoin = 1Bitcoin, the customer and the store are just trading 100,000 sats back and forth regardless of the conversion rate.
Or is it the stable coin value (the $) that is returned at $59.11. Neither is right or wrong. It just needs to be a clear policy that your customers are aware of at the time of purchase.

Holding Bitcoin as an Asset

Bitcoin is creating a store of value as a new asset class. While it goes up over time, it does have volatility swings as traders buy and sell this volatility to potentially profit. Monetary theory of Bitcoin shows that as adoption increases, the huge swings in price will lessen as large movements in bitcoin transactions will have less impact on the overall price. What is known is that from 2009 to 2024, Bitcoin has grown from a price of fractions of a penny, to close to $100K in value per Bitcoin. And with inflation eating away at cash value at a mandated 2% every year (not withstanding the current high inflation we have been dealing with the last several years), cash is a depreciating asset. The carrying cost of money is upwards of 10-20% a year. This means that cash over a 10 year period will lose its value significantly, and you need a way to increase your purchasing power through an alternative asset. Bitcoin fits this need through its appreciation power over time.

Depending on your business type, sole proprietor, LLC, Corporation, etc…, you may go down different paths of how your Bitcoin is acquired, and stored securely, and used as an asset.

There are many things to think about when it comes to storing your Bitcoin. A singlesig wallet is secure but offers a single point of failure. Lose your keys, lose your Bitcoin. A multisig wallet provides 2 of 3, or greater, redundancy to your Bitcoin wallet. Lose one wallet, still gain access through a combination signature of the other two devices as it takes two signatures to access the funds. You can use a combination of self-custody and shared custody with a 3rd party that is holding one of your 3 multisig wallets. All are valid choices depending on your needs. You can also use a custody trust to hold your Bitcoin, or perhaps put it in an ETF, if you trust the 3rd party to act in your best interest. Be aware of the fine print. Some companies state that the Bitcoin you entrust with them is actually an IOU to you, and that your Bitcoin may not be protected against their creditors. Self-custody is the number one way to ensure this, but can be daunting, as such we would recommend a multisig wallet with a 3rd party to help with recovery, protection, and redundant access to your keys.

Michael Saylor is the Executive Chairman for the Fortune 500 company, Microstrategy. Microstrategy is a software business that has a corporate strategy of holding Bitcoin in its corporate treasury. If you are a corporation, you would do well to review Bitcoin for Corporations that Microstrategy promotes.

Hodling Bitcoin for the long-term should increase your bottom line over time. The Bitcoin that you hodl can be used as collateral for capital purchases. An example that Michael Saylor mentioned is taking a 10% loan against your Bitcoin for 5% interest and buy business equipment that you need such as a car or tractor. The Bitcoin asset continues to grow in value over time, and the loan is paid off, and the capital expense asset is yours to keep.

Here is one path to integrating Bitcoin into your business:

1. Get a Bitcoin node. Let it sync to the Bitcoin blockchain.
2. Integrate a point of sale system with the node.
3. Accept payments in Bitcoin.
4. Sweep the Bitcoin to a cold storage multisig hardware wallet.

Keep in mind that accounting software has not caught up with the times. I’m not aware of any system out there yet that allows Bitcoin to be shown as an asset while also checking current rates to establish Bitcoin values in your balance sheet. Ideally, it will end up being treated as a currency and you will have to plug in an exchange rate of dollars to Bitcoin to get a running value of the worth of your Bitcoin holdings. You will also have to keep a record of your acquiring price of Bitcoin to establish your tax basis. Your Bitcoin wallet should be able to do this for you.

The Tax Man Cometh for Capital Gains…or Maybe Not

Bitcoin used in transactions creates a taxable event per US law. Not withstanding the income generated from the sale, the spender (the customer) of Bitcoin is subject to capital gains tax if the Bitcoin they used increased in value since the time it was acquired. The receiver however is not subject to capital gains taxes until they decide to spend it, or perhaps convert it to cash and swept to a bank account. The point of conversion from Bitcoin to another form of money technically creates a taxable event.

There are several ways to mitigate taxes when it comes to spending and accepting Bitcoin as both the customer, and the business.

As a customer, you can spend other peoples Bitcoin. 3rd Party apps such as Strike App allow you to load dollars to fund the account, and then when the customer pays with the app, it’s Strike’s Bitcoin that is sent to the business, not the customers. No capital gains taxable event has occurred for the customer.

As a business, you can choose to hodl your Bitcoin and build an asset for the long-term. No capital gains taxable event has occurred for the business. But a business can also use a 3rd party Bitcoin processor to accept payments in Bitcoin, and immediately convert to the cash equivalent that would be swept to your bank account as dollars. Again, no capital gains taxable event has occurred.

There is no one right answer. Consult with your tax professional. This is not legal advice or investing advice. This is our opinion only of the current state of regulation on Bitcoin in the United States.

We can help you go down that path to self-sovereignty as a business. Contact us to find out more.