Sara was the founder and manager of a very successful ice cream store with many new and interesting flavors. Her business had many employees because she was open long hours during the eight warm months and there was always a crowd in line.
I gave Sara some operations and marketing advice. Before doing so, I looked closely at her ‘books’. They told me two things. One was that she had a dip in sales two months earlier and no explanatory change in weather. I asked her about it. She had lost an employee who was very popular in the neighborhood and was much loved.
The other was the absence of a line item for unemployment insurance. Sara’s was a new business and she hadn’t yet done much in the way of getting all the details organized. A very common experience of new businesses.
Her explanation was that her employees all loved her, they knew she couldn’t afford unemployment insurance and no one was going to be fired. I told her to get it, quickly. She did as I told her to. Fortunately.
Two months later, she was invoiced by the State Labor Board in Idaho for a former employee who had moved there and who listed Sara as one of several former employers. A very nice former employee who needed the unemployment coverage while she looked for a job.
A similar situation with Pat who ran a successful and growing cheese wholesale business. Pat hadn’t paid any income taxes or even filed any, ever. Fairly common for a young person starting out in their own business. So when do you start filing income taxes?
Pat had been in business for nearly four years. I asked him if he was losing any sleep over it. He said he occasionally woke up about the issue. I said: ‘ when you actually can’t go to sleep because you are worried about it, then start filing and paying income tax.
This is a common issue with young people who start a successful business.