My company is a mess and it seems there is no way out of the situation other than to go out of business. What should I do first? Note: If you don't feel like reading the guide below and following these action points you can save your great deal of time by skipping to the last step and taking free advice from an insolvency practitioner.
If your business is failing and you feel that there is no reasonable prospect of recovery then consider the following 5 actions points you can take to mitigate the negative effects of insolvency and/or bring about an unexpected recovery:
Cease Trading Immediately
As soon as you have knowledge of the company being insolvent you are required by law to cease trading immediately. If you continue to trade knowing that the company is insolvent without a realistic prospect of being able to repay its debts you could be accused of wrongful or fraudulent trading, both of which are serious offenses that could result in penalties such as fines, being held personally liable for company debts, directors' disqualification, and even imprisonment.
Notify IRS and Creditors
As soon as you cease trading you should contact IRS and your creditors to notify them that your business is insolvent, has ceased trading, and is currently in the process of taking the necessary actions. Contacting IRS as quickly as possible is especially important, as is notifying any creditors that may have already threatened to take legal action. You do not have to notify customers and suppliers, however after you've ceased trading it is unlawful to take on any new jobs/contracts, or to create any new company debts. In some countries the Customs Office, is also notified (especially when they're collocated with the Revenue Office).
Educate Yourself on the Topic of Insolvency and Liquidation
View our main pages and/or download our guides to learn more about what it means to be insolvent and what happens during the liquidation process. By preparing yourself for what to expect you'll be in a better position to avoid unnecessary mistakes that could lead to accusations of misconduct when the liquidator conducts the mandatory post-liquidation investigation.
Examine Potential Rescue and Winding Up Options
Depending on your situation you may not have to concede to liquidation and dissolution just yet! There may be some recovery options that you're overlooking, including company voluntary arrangement (CVA), administration, asset-based financing, and pre-pack administration.
Consult with an Insolvency Practitioner
Finally, the only way to know for sure what the best course of action is for your company is to consult with an insolvency practitioner or your local Small Business Administration Office. Of the independent insolvency practitioner of one kind or another, the most well know is the protagonist of "The Profit!"
The Profit is an American reality television show broadcast on CNBC. On each episode Marcus Lemonis an independent insolvency practitioner and turn-around artiste, offers struggling small businesses capital investment and his expertise in exchange for an ownership stake in the company. Another TV series is "Bar Rescue." In Spike TV's new series, Bar Rescue, Jon Taffer, one of the country's top restaurant and bar consultants, will give failing establishments one last chance to succeed.
The show will delve into every business facet of running a bar from creating a profitable drink/food menu to crowd management to music selection to managing disgruntled employees. This marks the first food/beverage-themed show for Spike TV, furthering its effort to expand and broaden its audience.
Taffer will use his "in-your-face" style along with his renowned method of management called "Taffer Dynamics" to transform the bar into a vibrant, profitable establishment. He will utilize everything from state-of-the-art science such as eye tracking technology, monitoring of body temperature and even reading pheromone output in patrons in order to create an ambitious plan of action. Taffer will focus on one establishment per episode from cities all around the country. Taffer's wife, Nicole, will appear in the show along with a rotating group of experts.
Still, another TV Show is "Restaurant Impossible." Turning around a failing restaurant is a daunting challenge under the best of circumstances. Attempting to do it in just two days with only $10,000 just, may be impossible, but that's exactly what Chef Robert Irvine sets out to do in his new Food Network show, Restaurant Impossible.
Robert will use a little MacGyver and a lot of muscle to rescue these desperate places from complete collapse. Can one man, in two days, with $10,000, turn the tide of a failing restaurant and give hope to the owners, vendors and their employees?
I have summarized three of the most popular 'Rescue' Reality TV Business Turnaround shows, on the subject of so called, 'TV Turnaround' shows. At this writing, to date all toll there are nine (9) reality TV shows that will make you smarter about business http://www.businessinsider.com/reality-business-tv-shows-2015-8
If, The Taxman is NOT Notified You Can Expect a Nightmare My nightmare year being chased by IRS for fines on my grandfather's estate. Grieving family harangued by series of letters from taxman with escalating demands for payment of levies, fines and subsequent penalties.
When Sarah Hancock’s grandfather died after suffering from acute dementia - Alzheimer, she thought she would help her grieving family get his affairs in order by calling IRS’ "Tell At Us Once," or "See Something Tell Something," service, and telling them about his death amongst other organizations like the Social Security Administration to stop sending entitlement payment checks.
Little did she know that one phone call would lead to a nightmare year of letters demanding ever-increasing levies, fines, late fees and penalties which kept coming even when both Miss Hancock and her late grandfather's accountant wrote to the taxman explaining that he did not owe any tax, levies, late fees and/or penalties plus interest on the order of ~8%.
Frank Hancock died in December 2014, after an illness which had left him in hospital for over a year. He and his wife Joyce each took half the proceeds of a small delivery business, but Mr Hancock’s half was so low it was covered by the personal allowance and married couple’s allowance. His accountant, Thomas Shreeve, had continued to file returns on his behalf, and IRS’ own tax calculations showed that he was actually due a small rebate or refund.
When he died, Miss Hancock called IRS, and an automatic letter was sent out asking her to file a return for Mr Hancock’s outstanding tax. This had already been done, so the couple’s accountant returned the forms alongside a letter explaining that the return had already been filed, so the form was superfluous, at best.
Nevertheless, the form was sent again by IRS in June – a full four months later – with a standard letter saying that it had not been filled in correctly and signed with different color inks.
A month later Miss Hancock received another letter with a bill for $200, the first late filing penalty. By November, almost a year after her grandfather’s death, the penalty demands, sent in "daily penalty reminder" letters, had increased to over $600.
By mid-December the penalty had doubled to $1,200, and in mid-January a demand for $2,400 was sent, plus interest of 8% ($192), for a total of $2,592. This final letter was also the first time the family had been given an option, to challenge or appeal the fine & penalties.
Miss Hancock said: “It’s been a complete nightmare for the last 12 months. I made one phone call and got put down as the point of contact, which is fine, but I don’t want to be dealing with all these levies, fines and penalties.”
An accountant and former IRS inspector of taxes, Mr Shreeve, who is 96, said he had filed all the returns on time and helped the family pay several years of backdated tax on the business before Mr Hancock's illness.
He said: “Everything was in order with the estate, but they have ignored every single letter that was sent to them.” At one point the family were told to pay the fine up-front and then appeal it retrospectively - something they did not want to do as they did not trust IRS to listen to their appeals.
When contacted by a popular Money Magazine and local rag "The Phoenix Newspaper," IRS said it would cancel all the penalties on Mr Hancock's estate as a gesture of goodwill - but insisted it had not received his return. However, given the now by law more benevolent IRS, a spokesman admitted the series of demands sent to the Hancocks did not deal with the situation, appropriately. The spokesman said: "We apologize to Miss Hancock. We have cancelled the penalty as a goodwill gesture and can confirm that Miss Hancock will not have to submit tax returns in future."
Last year the taxman was given new powers to demand payments within 90 days or face jail time from those suspected of abusing tax loopholes, and to compel them to pay upfront and appeal the decisions later. And now something similar is being enforced regarding student loans that are in arears. Robin Williamson, technical director of the Low Incomes Tax Reform Group, which is trying to make the tax system simpler for people with low incomes, said the Hancocks' problems stemmed from a change in IRS' approach to fines & penalties.
"The automatic penalty regime was introduced before 2010. At the same time they separated the penalties for returns and the returns for late payment, so even if you owed no tax, you still got penalties for not submitting your return whereas previously if you had paid your tax or did not owe any that would be in your favor. Also given that, as a business, you have to estimate your taxes for the following year, ahead of time - if, you have underestimated and as a result underpaid - quarterly, you now have additional fines and penalties for late payment of your taxes, plus penalties and interest - if the business does well in the previous year - when it comes time to settle with Uncle Sam at end of that year/ beginning of the next year, time frame.
"It was a deterrent but it also had the unwanted side-effect of bringing in a lot of often vulnerable people, elderly people, taxpayers who couldn't get to an adviser or didn't know how to handle the forms they were getting, or knew about the changes in the tax laws. When the right way to deal with it would have been some form of personal contact, what they get into is this maelstrom of letters and threats from the authorities.
"It also results in a lot of uncollected penalties which just have to be written off at the end of the day. So it's a big problem and it doesn't solve the problem of people who are trying to avoid filing their returns.
"It's expensive, and useless, because it doesn't solve the problem of the missing return," he said
• Want an answer from IRS? Better off writing a registered letter with return receipt, than using the phone, say accountants
• IRS given go-ahead to demand ~$10.10bn from taxpayers – before they have a chance to appeal
In a consultation document published last year IRS said it would consider removing penalties and possibly interest, since they don't pay out interest when they owe you refunds & rebates, where people don't actually owe any tax, as part of changes to the system of fines. These would not be implemented until the Finance Bill 2017, Fiscal year 2018 at the very earliest.
Chartered or CPA accountant Peter Hollis, a senior member of accounting trade body the Institute of Chartered or CPA Accountants, who has expressed concerns about similar cases where lost returns have resulted in large fines for taxpayers, criticized IRS for its hastiness to issue fines after technical computer glitches, break-ins and/or mix-ups.
He said: "This is the sort of thing that keeps happening. The Revenue would like to think that they deal with things quickly, amiably and compassionately and proactively pick out mistakes, but they don't. It never ceases to amaze me the lack of compassion within the revenue and how hard they can be in dealing with people."
He also warned that cases like this could get worse in future as IRS is given powers to go into people's bank accounts (even their offspring's accounts), to extract funds, garnish paychecks and cease businesses and property to compensate, for what amount is in arrears.
NOTE: The same is true for HMRC.
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