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Shutting the doors of a business may lead to litigation

Running a successful business in Texas can be difficult, and when financial problems develop, some business owners may find it difficult to keep the doors open. If the decision is to close the business, it may have disastrous consequences if the owner just shuts the doors and walks away. If there may be creditors, employees, customers and others owed money, litigation may result that proper procedure might have avoided.

It is a challenging task, but following some steps may help to avoid litigation. To prevent problems with the IRS, it is important to keep taxes current and to make sure withholding taxes and related payments are submitted to the appropriate revenue offices on time. Furthermore, it may help to keep meticulous business records that show all expenses incurred, along with financial statements that will allow an accurate picture of the true situation.

Another thing to avoid is commingling personal and business funds because that might lead to the business owner's personal assets being threatened. To raise capital to save the business, owners may take out loans, and it is important to declare all debts on these applications or face the possibility of criminal fraud charges. If the company is investigated, any preferential payments made during this time of financial difficulties may also be questioned. Only rent, payroll, salaries, insurance payments, retirement plan contributions, vendor payments and utilities may receive preferential payment.

These are but some of the business mistakes that could lead to litigation. However, there are more, and any Texas business owner who is experiencing financial difficulties may seek professional advice from an experienced business law attorney. Not only can a lawyer work to prevent situations that might lead to litigation, but he or she can also provide guidance in the proper procedures to close the business.

Source: FindLaw, "Managing a Business in Financial Distress Prior to Closing", Accessed on April 7, 2017

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