The Importance of Establishing Good Business Practices

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The recent relief measures awarded to businesses under the CARES Act taught some business owners a valuable lesson: the importance of running your business in a financially responsible way. I discovered, through interviews with many small business owners, that a significant number of small businesses have neglected to file taxes consistently during the life of the business. Another subset, while they may have filed consistently, underreported their income.

While such actions may seem beneficial to the owners in question, they could result in serious consequences for the owner. The most serious result could be tax evasion charges by the authorities. But there are other potential consequences as well. The relief package highlighted them. While proof of filing taxes is not required, you still need to show proof of payroll to qualify for a loan under the Paycheck Protection Program. If you have not been filing taxes but you filed for a PPP loan, you are documenting that you have a functioning business yet you have failed to file taxes. You are leaving yourself open to future inquiries by the authorities. If you meticulously do the right thing you would not have to worry about any possible adverse outcome.

Outside of the CARES Act, business owners can apply for a regular SBA business loan. To qualify it is important for the owner and the business as well to have good credit. Yes, businesses can have their own credit. To establish business credit you just need to have the following: a corporation with an EIN number; a dedicated business phone number; a business bank account. Make sure your suppliers or vendors report to the credit bureaus. Pay your bills on time. In no time you can establish a credit record for the business.

Chester Peters, Contributor