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Mistakes You Should Never Make

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Re: Mistakes You Should Never Make

#111

Post by jakejake »

x0x0 wrote: post #89
tptacek wrote: post #33

Of all the financial mistakes you can possibly make running a company, withholding payroll taxes and then failing to remit them is probably the worst. Be thankful you caught this before the liability exceeded your available funds, because company operators are apparently routinely held personally liable when there's a shortfall, and I'm not sure that debt is even dischargeable in bankruptcy. What's worse, minor versi…

The logic here appears to be that since the employee is deemed to have paid the government on the day that an employee receives his or her paycheck, the employer is holding those funds in a trust for the government, to be remitted quarterly. The government appears to believe in Monteiro's strategy: "Fuck you, pay me." So you -- as an officer, an employee who pays bills, possibly a board member, or possibly other rela…

It's totally understandable how these companies get themselves into this situation. Your employee gets a paycheck of $1000 and in addition to that you send off $700 in payroll tax. Well, if your bank account is low you can pay the employee his/her regular amount but delay paying the tax. Your employee doesn't know as long as you manage to pay the withholdings before the end of the quarter (or worse case end of the tax year).

This is known as "borrowing against payroll tax" and is pretty much universally known as a terrible idea! It does happen, though and a business might be dangerously low on cash, but has big amount coming in (from a consulting job, investment, etc). It's just very risky because if you get yourself into a position where you can't pay the bill, then you will be screwed just like one of those companies you mention.

But - if you just simply use a payroll service and always pay the withholdings without fail then you won't have that temptation and won't get yourself into trouble. No need to try to hide your money or something so the IRS can't get it.

Re: Mistakes You Should Never Make

#112

Post by zem »

methodover wrote: post #9

> In the early days I would often let potential customers think we already had a feature they wanted What. How is this even remotely acceptable? If discovered it destroys your credibility. Among your employees it destroys your credibility. If I was an employee and found out that this was happening, I'd be extremely upset. I wouldn't trust a thing you say. If you'll lie to customers, you'll lie to me.

as someone who headed the dev team in a startup where the ceo did this repeatedly, i have to say it's a huge mistake. it was very demoralising to the entire engineering side of the company; we felt that we were never given a chance to deliver a properly working product because we were always working round the clock and frantically adding half-baked features that had been used to close a sale.

Re: Mistakes You Should Never Make

#115

Post by mechanical_fish »

aaronblohowiak wrote: post #100
x0x0 wrote: post #89

Earlier quoted context omitted.

The logic here appears to be that since the employee is deemed to have paid the government on the day that an employee receives his or her paycheck, the employer is holding those funds in a trust for the government, to be remitted quarterly. The government appears to believe in Monteiro's strategy: "Fuck you, pay me." So you -- as an officer, an employee who pays bills, possibly a board member, or possibly other rela…

This is why you use a payroll company that takes all the money for you for each paycheck and handles the quarterly filing for you -- no "extra cash" hanging around. I think this is called "Full Service Payroll" and can even include insurance against tax liability. I assume they make money on the float, but I'm not sure.

Yes, my company has used SurePayroll and it works exactly like this. They charge fees, as well as presumably making some money on the float.

The fee is around $40 per month (per employee, I suspect) and it is money well spent. There are pains associated with the service - the reporting is not entirely transparent, and when things go wrong with the automated systems I have gotten odd letters from my tax authorities which needed to be turned into support tickets (which were then handled promptly). But I would never use anything less than a payroll service. If my payroll gets more complex I might upgrade to a bookkeeper with well-documented payroll experience (at a cost which would, I suspect, be considerably higher than $40 a month), but I'd never try to do payroll myself, for reasons which are amply attested in this thread.

Also, accountants. +1 for accountants.

Re: Mistakes You Should Never Make

#116

Post by slantyyz »

seancoleman wrote: post #70
dreamweapon wrote: post #21

Mistake 1: Taxes This thing about not noticing that you weren't paying payroll taxes wasn't a "mistake." It was pure head-in-assery. How can you "miss" the fact that you weren't being subtracted for payroll taxes? One quarterly / annual review after another, for 3 years? It's like running a personal budget, and "missing" the fact that you aren't paying rent.

Founders get bombarded with many corporate taxes they are often unfamiliar with. As a founder, it's not inconceivable to think all the proper taxes are being paid when one slips through the cracks.

>> As a founder, it's not inconceivable to think all the proper taxes are being paid when one slips through the cracks.

In any company, someone's responsible for the books (whether it's the CEO, some other employee, or an outsourced accountant), and you would think that the bank statements would be reconciled with the general ledger more than once a year. At the very least, it would have been done with each fiscal year end.

That the unpaid payroll taxes weren't noticed for almost three years is mind boggling to me.

Re: Mistakes You Should Never Make

#117

Post by tgflynn »

x0x0 wrote: post #31
greenyoda wrote: post #18

Earlier quoted context omitted.

It also puts employees under constant pressure, since every feature is already "late" as soon as implementation begins, and extraordinary effort is required on an ongoing basis just to keep the company from embarrassing itself. At the company I work for, executives and sales people frequently make "commitments" to our customers for features that don't yet exist. People who make commitments on my behalf without even m…

I worked for a founder who did this all the time and it's incredibly stressful as an employee. It would be fine in the limited case where the features are fast and easy to implement: say two days' work at most. I enjoy my paychecks clearing every other week, and losing a sale over small amounts of effort is dumb, particularly since sales where relatively large (low hundreds of thousands of dollars). But this founder…

having to do with distributed markov chains

I'm guessing you mean distributed Markov Chain Monte Carlo ?

Sounds like an interesting problem, I'd really like to hear more about that.

I'm really interested in "difficult" problems with significant commercial applications. (My contact info is in my profile if you don't want to post publicly).

Re: Mistakes You Should Never Make

#118

Post by tptacek »

jakejake wrote: post #111
x0x0 wrote: post #89

Earlier quoted context omitted.

The logic here appears to be that since the employee is deemed to have paid the government on the day that an employee receives his or her paycheck, the employer is holding those funds in a trust for the government, to be remitted quarterly. The government appears to believe in Monteiro's strategy: "Fuck you, pay me." So you -- as an officer, an employee who pays bills, possibly a board member, or possibly other rela…

It's totally understandable how these companies get themselves into this situation. Your employee gets a paycheck of $1000 and in addition to that you send off $700 in payroll tax. Well, if your bank account is low you can pay the employee his/her regular amount but delay paying the tax. Your employee doesn't know as long as you manage to pay the withholdings before the end of the quarter (or worse case end of the ta…

You've just described a company willfully failing to remit payroll taxes. That's not just a terrible idea; it's (often) a crime, and it's easy to see why: you aren't really "borrowing", so much as you are "stealing" money that doesn't belong to you and hoping you can pay it back before anyone notices.

Re: Mistakes You Should Never Make

#119

Post by jacquesm »

aaronblohowiak wrote: post #100
x0x0 wrote: post #89

Earlier quoted context omitted.

The logic here appears to be that since the employee is deemed to have paid the government on the day that an employee receives his or her paycheck, the employer is holding those funds in a trust for the government, to be remitted quarterly. The government appears to believe in Monteiro's strategy: "Fuck you, pay me." So you -- as an officer, an employee who pays bills, possibly a board member, or possibly other rela…

This is why you use a payroll company that takes all the money for you for each paycheck and handles the quarterly filing for you -- no "extra cash" hanging around. I think this is called "Full Service Payroll" and can even include insurance against tax liability. I assume they make money on the float, but I'm not sure.

That's very dangerous, no matter what the reputation of the firm.

The thing to do is to use separate accounts for reserves like these and to pay directly into the coffers of the tax man, lest the party that you do business with unexpectedly goes bust (they do) and you end up being liable again for the same amount of tax that you already paid to the payroll company. Don't for one second think that you're off the hook because you paid the payroll taxes to some other company.

The best arrangement is where they tell you exactly what is to be reserved and when it is due and you do the payments. That's how I've been doing it and it works flawless, never a problem (so far!).

As an extra bonus, you get to check the amount against the last couple of payments you made and you'll spot any big fluctuations before things get out of hand.

Re: Mistakes You Should Never Make

#120

Post by Swizec »

MadManE wrote: post #66
Swizec wrote: post #22

Earlier quoted context omitted.

Two things: 1. In my limited experience with pitching/salesing when you say "Yeah I think we can probably build that" the customer/client will take it as "We already have this". There is no amount of rational talking and explaining you can put in place to prevent this. If they ask for something, and your answer is anything but an unequivocal "No." they will think you already have it. 2. Isn't the whole concept of MVP…

My understanding of MVP is that you essentially sell a lack of features. Make something that does as little as possible that someone will buy, not selling something and then figuring out how to do it.

Literally the first step described in Four Steps to the Epiphany is selling mockups. Mockups.
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