

Ask HN: I have debt and owe back taxes — can they take my startup? - amiintrouble

Throwaway account.<p>I have credit card debt and owe back taxes, all totaling around $50k. My small startup has paying customers but does not yet have enough left over to actually pay me enough even to cover payments.<p>First, can companies or the IRS sue to take my company away from me?<p>Second, is my personal situation a liability for attracting a round of funding?
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philiphodgen
1\. The IRS won't seize your startup. It doesn't have any value -- could they
sell it to get cash? Doubtful.

2\. The IRS can make your life personally miserable. Or not. In my experience
the best way to keep them off your back is to communicate, not hide, and start
sending money. Even if you are only sending in $50 per month that shows your
intent.

3\. Creditors will not seize your startup. They can't sell it to raise cash.

4\. Creditors will make your life hell.

5\. All of this assumes you formed a company of some kind for your startup. If
it is just you -- as a sole proprietor -- you may be f'd.

6\. This debt problem will consume an incredible number of brain CPU cycles.
You will be distracted until you install a payment plan and have it in
progress. It will -- in my personal first-hand :-) experience talk to you
constantly. This is so important to get handled.

And yes. Tell your funding people. If you hide it and they find out you are
screwed -- not because you are in debt but because you don't tell the truth.

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staunch
The IRS will accept _any_ amount per month if you get on a plan. Like $30/mo
if that's all you can do.

They will also SOMETIMES agree to accept a lower amount of money. Usually
nothing less than the principal you owe (e.g. they'll remove some penalty and
interest fees). They may only do this after a year or two of you making tiny
payments. They must believe you will never be able to pay it all back.

They absolutely will garnish your wages and/or seize any bank accounts you
have. Call them immediately.

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orijing
Companies can sue you for anything. The question is whether they have a case
that involves taking your ownership of your startup. Have you been making
minimum payments (at least) on your credit card? If so, they won't do anything
about it. Otherwise they will probably, at some point, throw you to the
collections agency.

The IRS is tougher, since not paying your taxes is a felony. I suggest you do
everything you can to pay your backtaxes as soon as possible.

And yes, of course your personal situation is a liability. Investors, should
they become aware of your situation, will know that the first $50,000 or so
will sink directly into your bank account, NOT the company. Therefore, your
startup will have to be very compelling or the terms very good (to them) in
order to make up for it. This is in addition to the signal you send, since
managing scarce resources (money) is a critical skill for running a startup.

Good luck.

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amiintrouble
> Investors, should they become aware of your situation

Morality aside just for the moment, as I'm not saying I would, but: is it
illegal to withhold from investors information about my personal finances?

~~~
staunch
IANAL. You have no obligation to disclose your personal finances. If they
asked and you lied it might open you up to liability though.

I don't think you have any moral obligation to tell a potential investor
either. You do have a moral obligation not to let it interfere with your
company though. Don't ignore it and hope it goes away. Face it and turn it
into a predictably annoying problem instead of a scary unknown one.

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shareme
A question, usually when you have some debt and back taxes the usual choice is
to start a small business of one that is solely designed to make money fast
via contracts, etc to pay off that debt and taxes.

Can you tell us why you choose not to do that?

No, not being harsh just curious of the thought process.

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cheez
You should be able to take a few contracts to make up this debt in a year.

Work hard.

Don't get into debt again.

