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Mistakes You Should Never Make

sethbannon.com

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Re: Mistakes You Should Never Make

#251

Post by jacquesm »

tptacek wrote: post #228
jacquesm wrote: post #220

Earlier quoted context omitted.

Does the American system have any provision for payroll companies that fail to fulfill their obligations? (segregated accounts per client, accounts only usable for remittance of the salaries or taxes with the payroll company then taking out its slice when everything else has been done?) I remember the Accupay affair and that took a lot of employers by surprise, and even though 'best common practice in the US' may be…

You remember the affair of a tiny payroll processing company in Baltimore? Is there some news source about them that isn't in the local Baltimore media that I missed? I had to give Google News a custom search range just to find those local hits. If that's the kind of firm you're talking about, I agree. Don't use tiny fly-by-night payroll firms. Just use SurePayroll or someone like them. I'm serious: that's a good poi…

I remember the Accupay name because a friends business got caught up in that and unfortunately his company did not survive.

Having a ton of friends in the US means that sometimes I get requests if I can help someone out on short notice, in that particular case there wasn't anything I could do. (I was relatively short on cash at the time but even if that had not been the case I probably would not have stepped in.)

Re: Mistakes You Should Never Make

#252

Post by jacquesm »

jlevy wrote: post #250

As internal counsel for YC, it was very upsetting to learn about the ongoing troubles at Amicus. It was particularly distressing to hear about the payroll tax issues, given that YC has funded excellent companies that specialize in accounting and payroll for small businesses, such as Indinero and Zenpayroll. The tone of Seth's post suggest that YC has supported Seth in all of his recent actions. That is not true -- YC…

Thank you for this note, good to see YCs position on stuff like this.

But to clarify the point the OP made about being 'naughty' had to do with a different part of the narrative, the one where promises were made to customers, not the part where they do not pay the withheld payroll taxes (the illegal component).

Re: Mistakes You Should Never Make

#253

Post by roel_v »

jacquesm wrote: post #235
will_brown wrote: post #75

Earlier quoted context omitted.

As a former transactional/commercial litigation attorney I too would see this issue regularly. One interesting "hack" I would see clients do regularly as owner/employees, they would minimize their own salary to avoid payroll taxes, maximizing their distributions (distributions are not subject to payroll taxes). Unfortunately for them the IRS accounts for this hack , and if an IRS audit finds the salary isn't reasonab…

In NL we actually do have such a 'bright line', a very reasonable amount that anybody in the hot seat is required to pay out of their business on an annual basis as a salary. If the business is not doing well you can negotiate that down to ridiculously low levels provided you do not borrow from the company at the same time . That last bit is the bit that bites, many business owners already have a line of credit with…

"In NL we actually do have such a 'bright line', a very reasonable amount that anybody in the hot seat is required to pay out of their business on an annual basis as a salary."

That is the floor, it's not a 'bright line'. If the field of that particular business the 'usual salary' is higher, you have to pay yourself that, and you're at the mercy of the tax office in the same way, because they decide what is the 'usual salary'. Also, a director is not allowed to pay themselves less than their employees, for example.

That said, it is true that it is fairly easy to get into contact with an inspector and get advice on how to proceed.

Re: Mistakes You Should Never Make

#254

Post by personZ »

jacquesm wrote: post #242
personZ wrote: post #149

Earlier quoted context omitted.

It's rather surprising that the IRS wasn't dramatically more aggressive about this. Every year they had people submitting tax returns claiming taxes paid that weren't paid, for years. I would have expected the IRS to have searched the Earth for this company.

The address was wrong. Probably a mistake, but that trick has been used on purpose as well.

I understand that they sent some mailings, but at some point...months in, or even years in...you would expect an investigator to be tasked with hunting this company down. That ultimately is not a difficult task (aside from obvious and trivial web searches, contacting one of the employees who claimed to have paid tax, the government getting none of it). This seems like the sort of oversight that in most cases would leave the government holding the bag.

Re: Mistakes You Should Never Make

#255

Post by roel_v »

josu wrote: post #96
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…

Trying to file your company's taxes on your own is like trying to represent yourself in a trial.

Wisest advise in this thread. My mind boggles at the idea that apparently there are investors who give money to people who do their own taxes.

Re: Mistakes You Should Never Make

#256

Post by jacquesm »

personZ wrote: post #254
jacquesm wrote: post #242

Earlier quoted context omitted.

The address was wrong. Probably a mistake, but that trick has been used on purpose as well.

I understand that they sent some mailings, but at some point...months in, or even years in...you would expect an investigator to be tasked with hunting this company down. That ultimately is not a difficult task (aside from obvious and trivial web searches, contacting one of the employees who claimed to have paid tax, the government getting none of it). This seems like the sort of oversight that in most cases would le…

The way the tax office works is simple: the biggest holes get plugged first, the smaller ones can wait until they've become either big holes or until they've been resolved.

Usually they are resolved. By the time a small company has developed a big enough hole for the tax company to start tasking people with plugging the hole you're in very very hot water.

It's a resource allocation problem like any other.

Re: Mistakes You Should Never Make

#257

Post by tlrobinson »

jlevy wrote: post #250

As internal counsel for YC, it was very upsetting to learn about the ongoing troubles at Amicus. It was particularly distressing to hear about the payroll tax issues, given that YC has funded excellent companies that specialize in accounting and payroll for small businesses, such as Indinero and Zenpayroll. The tone of Seth's post suggest that YC has supported Seth in all of his recent actions. That is not true -- YC…

"The tone of Seth's post suggest that YC has supported Seth in all of his recent actions. That is not true -- YC supports its companies through good times and bad, but we do not support illegality."

FWIW I didn't get that impression from the post. Here's what I assume he was referring to:

"4. Naughtiness

Though the most successful founders are usually good people, they tend to have a piratical gleam in their eye. They're not Goody Two-Shoes type good. Morally, they care about getting the big questions right, but not about observing proprieties. That's why I'd use the word naughty rather than evil. They delight in breaking rules, but not rules that matter. This quality may be redundant though; it may be implied by imagination."

http://www.paulgraham.com/founders.html

I think not paying taxes would obviously fall in the "rules that matter" category.

Re: Mistakes You Should Never Make

#258

Post by anemic »

sethbannon wrote: post #198
xcubed wrote: post #158

This is just awful. There's owning up to mistakes, which is very "trendy" right now, and then there's being a straight up terrible, unethical, incompetent person. It's a bit gross to reference Ben Horowitz, to try to make this seem like a "classic" startup moment that every startup goes through. E.g., "most companies go through at least two, and sometimes over a dozen WFIOs in their lifetime." 1. "And so I learned th…

I see that you made this HN account only to comment on this post. I've learned that getting into a back-and-forth with anonymous posters on HN is never a good idea, but I'll respond just this once. 1. You're absolutely right. I majorly screwed up here. I say so as much in the post. 2. I think people can reasonably disagree here. An example: a potential customer asks a sales guy during a demo "...and will we be able t…

First, I think xcubed is right about #1. Not paying taxes should be considered a criminal negligence. All companies should operate within specified rules by the law and if one company does not it gets an unfair advantage over others. As a stakeholder in a company one should learn how to run the daily operations or hire some bookkeeper that can.

The other points (2-3) I don't see any problem as that's how all the companies that I know operate. Everybody sells half-ready products. I would even consider stupid not to do that.

Regarding the employees I think that every employee that joins a company is part of the and the team fails as a one. I have been a part of a failing team and I don't hold the company's owners resposible of my future career. I don't think Enron's owners were very much interested in the re-employment of their staff either.

I was once listening to a lecture by Monty Widenius and he said that statistically an enterpreneur succeeds in the third startup he/she gets going. Failures just teach us how to do things better. A culture where a failure is considered as our only lost chance of success does not lead to anybody succeeding.

Re: Mistakes You Should Never Make

#259

Post by aidos »

MortenK wrote: post #232

It's absolutely astonishing to me that SV investors and incubators pass along ~4 million USD to a team of people with so little business experience, as to neglect hiring an accountant. End result being unpaid payroll tax for almost 3 full years! No one ever asked what accounting firm Amicus used? No one ever just glanced at the finances and thought hey, where's the frigging payroll tax? Is valley capital so readily a…

Additionally, accountants can save you huge amounts of money in the long run.

We pay our accountant a very modest £100 a month, and he's easily saved us many multiples of that again and again. If you're ever thinking that you can't afford an accountant you may want to think again.

Re: Mistakes You Should Never Make

#260

Post by jozefff »

Dang, that's rough Seth. Thanks a ton for sharing though. It's hard enough to go through those kind of struggles, but to be honest and let others know the difficulties you faced and own up to mistakes you made is really valiant. Kudos to the max.
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