Bankruptcy Law, Blog, Business, Business Litigation
When Business is Bad, Who do you Pay?
This doesn’t seem like a tough question to most folks. You’ll pay the creditors to keep your doors open and delay paying the ones who may let you slide past due. Well, an important analysis will likely lead to other priorities. Consider first to whom you may be personally liable if the doors close… Taxing authorities and holders of guaranties must be at the top of the list. Then consider whether you, as the business owner, have it in you to guide the company through the dark times. PERSONAL LIABILITY Even if you are set up as a corporation or limited liability company to own your business and protect your assets from company debts, some claims for unpaid taxes create personal liability for those associated with the business. If you are focusing on who to pay to keep the doors open, you will likely not consider the IRS and the Department of Revenue (in most states), who will often be one of the last creditors to show up when you don’t pay on time. But sometimes, liability can pass on to the owners, officers or even an employee entrusted with making decisions on who to pay (yes, even the bookkeeper can be personally liable). Personal liability for unpaid business taxes generally arises from the failure to pay sales or use taxes and federal payroll taxes. In the case of sales/use taxes, that money never belonged to your business. The business collected it for the state and even though it was mixed with other business funds, there…
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