In a recent post I shared an item or two from my e-book Mistakes: Avoiding the Wrong Decisions That Will Close Your Small Business. This book was written to help the reader avoid the kinds of simple mistakes I made that resulted in the loss of our business. Many of you have responded positively to that post. I want to share another mistake many small business owners make that has closed many businesses, not paying their taxes.
Let me hasten to say this was not one of my mistakes. Our office manager made sure our taxes were paid every month whether anything else got paid or not. She would say that vendors can scream and sue and refuse to do business with you until your bills are paid, but the government can come in and shut you down. When they padlock your door you are finished until your tax bills are paid. I’ve seen more than one small business in our area closed down over unpaid taxes. Some never reopen.
Small businesses are over-taxed. Few people would dispute that, but that doesn’t exempt them from paying their taxes. Trying to finance your business with your tax receipts is a dumb idea that will bite you in the end.
In most states businesses are required to collect sales tax on the products they sell. It can be tempting for the owner to keep back part of those taxes in a month where he finds himself light on cash. He really isn’t planning on cheating the government out of their taxes but plans to pay it next month when business improves. However, there is no guarantee that business will be any better next month. Maybe sales are even less which means there’s less money to pay the taxes. After this goes on for some time the owner is suddenly facing a large tax burden with additional interest and fees added on. If he didn’t have the money to pay the taxes when they were due, where will he find the money to pay the extra fees added to the taxes? In many cases, he doesn’t, and the business closes with the individual still owing taxes.
One small business owner facing this problem was not aware he needed to pay certain taxes. That’s why you need a good knowledge of the tax laws in your state or you need to hire a good accountant who can file those taxes for you. Like everything else, ignorance of the law is no excuse.
I will never forget the words of our former office manager. Even if you don’t get paid, even if your vendors don’t get paid, keep your taxes current. The tax man can, and will, shut you down if you don’t. I make sure my business taxes are available and paid a few days early each month to avoid any issues.
This e-book is just $4.95 which is very inexpensive for the information it contains. I’m just being honest about the mistakes I made running that business which led to its closure. Avoid those mistakes and owning your small business will be much more enjoyable!