In dealing with many small business clients in my financial restructuring practice in Kentucky, I frequently see a lack of preventive assessment and planning by business owners to address the financial health of their small businesses. Below are a few tips and reminders for your Kentucky-based business.
1) Timely Pay All Taxes and Timely File All Tax Returns. Failure to pay taxes can result in significant penalties and interest. In addition, certain trust fund taxes can be assessed against certain responsible parties like officers of the corporation. Failure to pay taxes can result in not only a problem for your business but a personal tax issue for you as the business owner. It is important to realize that vendors and other creditors may have more flexibility in payment plan arrangements than the taxing authorities. If you are a small business owner and your company cannot pay its taxes, it is critical to immediately contact the taxing authorities to set up a payment plan. Failure to address tax liabilities can result in tax levies and tax liens which will interfere with your ability to operate your business. It is also important to timely file all tax returns to understand your company’s total liabilities.
2) Timely File Your Annual Report. In Kentucky, your annual report is due by June 30th of each calendar year. Failure to timely file your annual report can result in administrative dissolution of your company.
3) Contact Your Banker. If you have secured debts with a local bank, immediately contact your banker if you need a loan modification, extension, or to address loan renewal terms. Banks appreciate cooperative customers who keep them informed of any business changes that may affect the loan status. If you are required to provide the bank with annual and/or quarterly financials, be sure to timely supply those or explain any delays to the bank.
4) Avoid Delay in Addressing Problem Debts. Small business owners should take prompt action to address problem debts including potential judgments, taxes, or difficult vendors. A payment plan or workout strategy should be explored with any creditor that may sue as a resulting judgment will likely result in garnishment of accounts receivables, bank accounts, and the filing of judgment liens. If an out-of-court workout is not practical, your small business may want to explore filing for a Chapter 11 reorganization bankruptcy in Kentucky. Under Chapter 11 of the Bankruptcy Code, a small business has six months to develop a repayment plan for creditors.
Jamie Harris is a member with DelCotto Law Group PLLC. Her practice of law focuses on helping business owners hurdle financial obstacles. Jamie is best known for her experience in filing Chapter 7, 11, 12, and 13 bankruptcies. In her Chapter 11 cases, Jamie has represented companies from many different industries including healthcare, nonprofit, trucking, construction, commercial real estate and telecommunications.