The Constant Entrepreneur: Advice for Running a Productive Business

The Tax Man

I was talking recently with a small business owner who proudly told me that he had been able to finance his generally successful business without having to resort to taking any equity from his home. On the surface this seemed admirable and appeared to be protecting his personal assets.

Digging a little deeper I learned that he owes the federal government $40,000 in back taxes that were withheld from employee paychecks but not paid to the IRS. A business owner is fully and personally liable for unpaid withholding taxes (regardless of the structure of the business), so his personal assets were put at great risk. Plus, the penalties and interest on the back taxes were many times more than any interest he would have paid the bank.

He has been working with the IRS on a repayment plan and is making current tax deposits, so he should be OK.

The lesson is that the IRS is not a bank. Businesses need to pay all taxes on time and find other ways of extending cash flow.

Will Limkemann
Limkemann Business Advisors
440-871-0976
www.neobizadvisor.com
will@limkemann.net