COVID-19 Small Business Owner "Do" and "Don't"

Small business owners are particularly hard hit by the COVID-19 measures put in place across the country.  Social distancing measures are being enforced and many businesses have been ordered closed.  Particulary hard is that closure appears to be for an indefinite amount of time.  There is uncertainty as to what kind of assistance will come from the government.  To say this is a stressful time would be a massive understatement.  We want to provide some insight for small business owners.  Here we go:

DO:  The government makes the rules so they make the rules to favor themselves!  Pay your taxes that are coming due.  Payroll taxes and sales taxes are particularly problematic if they go unpaid.  Since payroll taxes are deducted from paychecks and since sales taxes are collected at the point of sale, small business owners are operating as the collecting agent for the government.  MONEY COLLECTED IS THE PROPERTY OF THE GOVERNMENT and the government will hit you with personal liability on this kind of debt if you fail to pay it.  If there is simply no money left to cover these expenses, file the return even if it is sent without payment.  Filing the return without payment will decrease penalties and, in some cases, decrease interest due.

DON'T:  While it can be tempting to tap credit lines to pay employees, never borrow money to pay payroll.  We fully understand that your employees may feel like family to you.  In some cases you have employees that are so loyal and hardworking that the thought of failing to pay them is soul crushing.  But if you do not have enough money IN THE BUSINESS to pay your employees then the time is right to let them go.  Federal and State actions are widening unemployment eligibility and you will never be able to match, from your business or from your personal resources, what government programs can do.  Do not create debt for yourself trying to cover staff salaries when that money is not coming into your business.

DO:  Evaluate every angle to reduce short term expenses.  If your business is closed right now does it need four telephone numbers or is maintaining the primary telephone number good enough?  Do you have things like magazine or newspaper subscriptions that can be cut?  Are there regular monthly payments that you are making to business services like Quick Books, Adobe, or other point of sale services?  Can these be temporarily suspended?  LOOK AT EVERY MONTHLY EXPENSE and see if there is a way to trim it back.

DON'T:  Borrow from one business to pay for another.  Many of our small business clients are involved in multiple enterprises.  They are true entrepreneurs.  While one business might be affected by government shutdowns and another might not be, do not blur the lines between the two.  While there are several reasons for this advice, here are a few: 1) POTENTIAL LOSS OF LIABILITY PROTECTION created by incorporation, 2) accounting nightmares of creating losses that cannot be written-off for the living company, and 3) hurting the thriving business when it should be the one that is helping you and your family.

DO:  Make sure that you keep engaged with your customers in a positive way.  You have built your business on customer relationships and you need to make sure that your customers know that you are still there - even if right now they cannot get to you.  Social media channels can be effective ways to reach your audience in a cost effective way.  E-mail blasts can certainly be effective too.  MAKE SURE CUSTOMERS KNOW YOU WILL BE THERE when all of this stuff has calmed down.  The flip side of this 'DO' is to make sure that you avoid the kind of public rant that causes customers to feel uncomfortable.  Sure, there is plenty of frustration to go around but be very careful about creating controversy around you or your business.

This list could literally go on and on.  Small business owners have a whole lot to consider right now and times are as tough as we have evern known them to be.  If you have any questions or thoughts on these points feel free to call me at (859) 360-1316 or e-mail me at stu@stubrownlaw.com