started a business, a restaurant, common choice.
Borrowed from personal credit cards to put money into
Personally guaranteed the bank loan to the business.
Short of money for business expenses, so did not send in the sales tax.
Did not send in the 941 income tax witholding for employees.
The sand dune is built one grain of sand at a time.
The business owner always thinks the biz will make money. Why else open up?
I’ve said it before, but, do NOT open a business unless you have enough money in the bank to live on for a year, AND enough to pay ALL the business expenses for a year, if you have NO revenue.
Yes, I’m serious.
Then, after a year, see where you are. And you won’t be behind on the trust fund tax liability that will not go away.
The government is not aggressive chasing that tax money, like sales tax, that you are required to collect on their behalf.
Because they know, you CANNOT discharge that in bankruptcy.
Lots of these clients keep their day job, and work for nothing in the start-up business.
It starts innocently.
You think it may take time for the business to get going, so the first time those quarterly taxes are due, and you don’t have the money, you just keep going.
NO! NO! NO!
That is the big red flag.
You can stay home and go broke. You do not have to pay rent, hire employees, rent equipment, and so on.
You can work for Walmart for $10 an hour.
Stop the bleeding!
The latest client is $57,000 behind on the sales tax, and another $50,000 on income tax.
And health and job issues put them further behind the eight ball.
Have a written business plan BEFORE you start. Pay attention when you are not hitting your marks
Limit how much money you will put into the business, and how many hours you will work for free.
It is part of the American dream to own your business, but it turns into a bankruptcy nightmare if you lose perspective as to what is really happening.