Over the past two weeks I have discussed 6 things that I advise entrepreneurs to keep in mind when starting a new business: 1) Keep your business finances separate from your personal finances; 2) Be wary of giving personal guarantees; 3) Talk to your accountant and insurance advisor; 4) Think carefully about the prices you charge and the services you perform; 5) Giving customers credit and protecting yourself and your business from unhappy customers; and 6) Leases, renting business space and dealing with lenders.
This week we wrap up our series about starting a new business with a focus on taxes and other requirements.
- Always file NJ Business Annual reports and pay your annual fees. If you fail to do so, you can lose the corporate protections afforded you by your company.
- Always file tax returns and reports on time even if you do not have the money to do so. Filing shows good faith, and may protect you down the road. You are personally responsible to pay certain taxes, such as payroll taxes withheld from employees, and sales taxes taken from your customers. These taxes cannot even be discharged in bankruptcy. Always pay NJ sales tax and Federal payroll taxes on time or as soon as possible.
- If you need to close your business and you operate as an LLC or corporation (S or C) always file final tax reports and a Certificate of Dissolution with the State of New Jersey, and the Federal government’s favorite agency, the IRS. Be sure you know how to wind down a business.
- Business divorces – if you are in business with someone else or are thinking about it, think about what might happen if you do not get along, one of you becomes disabled, leaves, does not perform, or dies.
If you are incorporated or have an LLC, be sure to have an Operating Agreement. Do not just rely on the generic types that you can get online or from an office supply store. Your agreement should address these issues:
- Who buys out whom? How will the price of a buyout be set?
- How do you “get off the hook” with business creditors?
- The “hold harmless” agreement or indemnification is only as good as the person behind it or the business’s assets.
- What are your obligations to one another, partners or shareholders in a small business? What do the duties of fidelity, good faith and being a fiduciary really mean? What conduct is required or likely to get you into financial trouble?
- Just because you have a partner doesn’t mean you only owe half the money. Your creditor, the NJ Division of Taxation or the IRS did not sign the partnership agreement. They will collect from whomever they get to first. Getting repaid your fair share from your ex-partner becomes your
Do you want to know more? Please contact us.
I encourage you to contact me to discuss issues related to your current business or the one you are thinking about starting.