Don't forget the taxman

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One of the biggest mistakes a small business owner can make is to not be aware of or ignore his or her tax liabilities.  A friend of mine owned a small business for a short period of time and wasn't aware he needed to pay certain taxes.  Although he was in business for less than two years his tax bill was enough that he found himself in big trouble.  The taxman was ready to freeze his personal bank account, place a lien on his home, and do lots of nasty things.  My friend is not the kind of person to ignore his taxes.  In fact, he is a very honest person.  He simply wasn't aware he needed to be paying this particular tax. He was able to work out a payment agreement and paid his past due taxes fairly quickly, but it still cost him penalties and interest.

His was an honest mistake.  Where so many small business owners get into trouble is by "borrowing" money they should pay in quarterly, sales, or payroll taxes to use to pay other bills.  Probably most of the people who do that are certain they can make it up later.  That is a very dangerous game.  If you need to you can extend paying your vendors.  They might scream and issue threats, but they can't usually shut down your business and seize your assets.  The taxman can do both, and will if necessary.

This cannot be emphasized too much.  Know what taxes you are responsible for paying, when they are due, and make sure they are paid on time every time.  It's fine if you have an accountant handle this for you, but you as the owner must make sure this is done.  If it's not, you are the one who will have to deal with the mess and pay the penalties.

I wish my friend had read this article from Forbes before he began his business.  It might have helped him avoid a lot of sleepless nights and headaches and would have saved him a lot of money.  You may want to read this yourself.

http://www.forbes.com/sites/theyec/2012/08/29/7-biggest-tax-mistakes-new-startups-make/