In this blog, we mostly concentrate on how bankruptcy can help individual Iowans with their personal financial situations. Iowa small business and corporations, of course, also file for bankruptcy for many of the same reasons. In the case of a sole proprietorship – a business owned by one person with no legal separation between individual and company – bankruptcy can be both a personal and company decision. If you’re the only owner of a company that isn’t doing so hot, simply letting it fold might not be an option for your livelihood. So what do you do? How can you turn things around?
When we talk to owners of sole proprietorships considering bankruptcy, we see a general pattern. Usually, these individuals are having problems generating enough income, and in turn are late on their taxes. Frequently, business owners put personal and payroll taxes on the backburner just to make ends meet and keep the company lights on. When a business is late on paying its taxes, there are several consequences. First, taxes start to pile up. Ignoring taxes one quarter or year means having to pay double that amount at the next due date. Second, late taxes are subject to fees and penalties that increase the total amount owed significantly. Finally, debts owed to the IRS aren’t your regular debts. The IRS will aggressively pursue your unpaid taxes, which could threaten your business and personal assets.
To avoid major tax and debt issues, the best option for many sole proprietors is Chapter 13 bankruptcy. Before elaborating, it is important to note that this strategy will not apply to corporations, who will likely have to apply for Chapter 11. But for those Iowa small businesses with one owner, a Chapter 13 benefits you in several key ways, especially if unpaid taxes are your main issue.
1. First of all, Chapter 13 bankruptcy ensures that fees and interest from past due taxes stops accruing. Before you move into the black, you need to stop going further into the red – Chapter 13 facilitates that shift.
2. Next, Chapter 13 may eliminate certain old tax obligations. While this won’t apply to everyone’s situation, it could be a major relief to business with excessive back taxes.
3. Finally, it allows businesses to plan their payment of all tax obligations over a longer period of time than the IRS would usually allow. Rather than scrambling aimlessly to keep your business afloat, Chapter 13 paves a path to full recovery.
Being the owner of a struggling sole proprietorship can be a stressful endeavor. But when things look hopeless, don’t let it overwhelm you. Marks Law Firm is here to help you get your business’s debts under control, which could also rescue your personal finances in the process. Call us today to find out if Chapter 13 is right for you.