All business leaders begin their endeavors with the best intentions. But the tough reality is that not all businesses succeed. They can fail for any number of reasons: subpar management, poor execution, or maybe they simply had bad timing. But some entities that should succeed fail because they encounter financial hardship.
It is rare for a business to experience nothing but success. And when the going gets rough, having a leader who knows how to navigate the organization back to smooth waters can be the difference between a company that succeeds and one that sinks.
Keep these tips in mind the next time your small business needs to consider proper budgeting and finance fundamentals.
Don’t Stop Paying Your Taxes
First and foremost, continue to pay your taxes, and pay them on time. When your business is in financial trouble, it is imperative that you avoid any actions that increase your personal liability, and the IRS is adept at holding individuals personally liable for unpaid corporate taxes. This includes the taxes withheld from employee salaries.
In the event that your tax payments are late, the IRS can work with you to reduce or eliminate any penalties. However, this forgiveness is predicated upon your strict and up-to-date record keeping. If you have thorough records of business expenses that can confirm you both refrained from unnecessary expenditures and made paying your taxes a priority, then you are on the right track.
Separate Personal from Business
It is never a good idea to mix business funds with personal funds. Oftentimes when businesses begin to struggle financially, owners will attempt to prop up their organization through personal loans, personal charge cards, or personal assets. And even though most businesses (LLCs, limited liability partnerships, corporations) are set up specifically to remove personal liability, mixing funds opens the door for creditors to move beyond the wall that separates owner from business. If the creditor succeeds in sidestepping this protection, then the owner becomes personally liable for the business debt.
The takeaway is, no matter how tempting it may be to use business bank account as your personal checking account, refrain.
Be Forthcoming
When your business is struggling and you need to secure new income through outside loans, the incentive is strong to hide your debt in order to improve your chances. Do not hide your debt. Not only is doing so considered dishonest; it is also fraudulent. You will still be held personally liable for any loans you manage to secure, but you could also face criminal charges.
When your business is in dire straits, it is tempting to make a decision you’ll ultimately regret. Let us advise you on all your available options, so you can make choices that are best for your situation. Contact us today to schedule an appointment.