I need some advise on small resturant operation

[stroker71]

 Long story short my wife and I will soon own a small coffee/breakfast restaurant where my wife currently works. It stays busy and is a good business in general but the current owner did some very dumb things....like not pay any taxes for 5+ years and now he's in a bit of trouble.

Question is is an accountant worth the money...neither of us have much experience dealing with the money end of a business. My aunt is a lawyer and will get us a LLC and help on that end but my lack of knowledge about when and where to pay the taxes and that sort of thing bothers me. Any advice/ insight would be helpful!

DuHasst

[Raptor]

For a small business it might be better to pay an accountant to audit and do taxes for you at the end of the year.

[CAP1]

Long story short my wife and I will soon own a small coffee/breakfast restaurant where my wife currently works. It stays busy and is a good business in general but the current owner did some very dumb things....like not pay any taxes for 5+ years and now he's in a bit of trouble.

Question is is an accountant worth the money...neither of us have much experience dealing with the money end of a business. My aunt is a lawyer and will get us a LLC and help on that end but my lack of knowledge about when and where to pay the taxes and that sort of thing bothers me. Any advice/ insight would be helpful!

DuHasst

  absolutley, yes. the best money you will spend. being a 1 man show, my accountant does some extras for me, on top of the normal. it's their job to keep those of us that don't have the time, or know the rules/regulations/laws in good standing. my accountant does that very well for me.

[CAP1]

For a small business it might be better to pay an accountant to audit and do taxes for you at the end of the year.

 if they need to collect sales tax. etc, it's best to pay an accountant monthly to keep things tidy.

 

[Rolex]

Beware.

Most failing businesses fail to pay employee withholding taxes. YOU will be responsible for those back taxes and penalties if you buy the business. Even if you get a written waiver from the local IRS office that you will not be held responsible, you will be responsible because no one in the IRS has the authority to make that waiver. Only a judge can do that and it won't happen. The IRS will come after you for the rest of your life. They can lock the doors and take every possession you own, including your house, car and everything in your home just to get pennies on the dollar for the unpaid tax obligation.

Do NOT buy a place with a tax obligation. You will regret it for the rest of your life.

I have a friend who did due diligence; he asked for and received letters from local, state tax offices and the IRS that there were no outstanding tax liabilities on a business. A year later, the IRS locked up his successful factory and put everyone out of a job for prior unpaid withholding because THEY failed to check when they gave him the letter.

He lost everything - his house, his family, his savings, and was homeless, living in an 15-year old car last time I saw him.

RUN from this business as fast as you can. Buy or lease the property and equipment, but do not "buy" the business.

Accounting services for small businesses are cheap and payable as a monthly retainer. Since you're unsure about it, it might be a good small investment every month.

[68ZooM]

wouldnt all the back taxes be taken out of the sale? you couldnt get a clear title unless all back taxes are paid by the seller in the contract out of the purchase price?

[PuppetZ]

Since the business is a "moral" person(I dont know if it's the right term. That's how we say it in french), the taxes due are by the business, not by the prior owner. If you own the business now, they will be looking at you to pay the taxes contracted by the business. As was said. Dont buy the business, you can buy/lease the equipment and location, but be really careful with others debt. It could very well be a way for the previous owner to get out of trouble. The officials will have no after thoughts putting you out of business and taking everything you worked for.

Good luck sir.

[Jenks]

I never bought a business but I started one in the '90's. You will not believe the taxes you will start paying. Generally the IRS wants its money every quarter IN ADVANCE! In other words you are to estimate your future earnings and pay taxes on it now. Self employment tax, basically SSI but since an employer pays half of an employees SSI, when you are self employed you pay it all. There is personal property taxes in a lot of areas too. You get taxed on business furniture, equipment and fixtures. And if you hire someone....well more taxes. 

I think a good bookeeper and/or accountant is worth it.

[Masherbrum]

Beware.

Most failing businesses fail to pay employee withholding taxes. YOU will be responsible for those back taxes and penalties if you buy the business. Even if you get a written waiver from the local IRS office that you will not be held responsible, you will be responsible because no one in the IRS has the authority to make that waiver. Only a judge can do that and it won't happen. The IRS will come after you for the rest of your life. They can lock the doors and take every possession you own, including your house, car and everything in your home just to get pennies on the dollar for the unpaid tax obligation.

Do NOT buy a place with a tax obligation. You will regret it for the rest of your life.

I have a friend who did due diligence; he asked for and received letters from local, state tax offices and the IRS that there were no outstanding tax liabilities on a business. A year later, the IRS locked up his successful factory and put everyone out of a job for prior unpaid withholding because THEY failed to check when they gave him the letter.

He lost everything - his house, his family, his savings, and was homeless, living in an 15-year old car last time I saw him.

RUN from this business as fast as you can. Buy or lease the property and equipment, but do not "buy" the business.

Accounting services for small businesses are cheap and payable as a monthly retainer. Since you're unsure about it, it might be a good small investment every month.

Spot on advice!   

[ROC]

Please don't take personal offense to this.  There are little tests in life that provide hints as to what you should or shouldn't do, each day, every day.

The fact that you are considering buying a business with a known tax obligation and are unsure if you should have a professional accountant on board is a telling and fatal concept from the start.

Asking this group for advice long before investing in an attorney to handle the purchase, protect you from liability, and then hire an accountant to keep you out of trouble is worse.

This is a game in here, what you are proposing will have profound impacts on you and those around you for many years, and it's as real as it gets.

You have no business getting into business if you had to ask that question in the first place.

That's the cold hard reality of business response.

The personal response is Good Luck, if you pay attention and keep your ducks lined up and protected, this could be a very exciting experience for you and your family and I truly hope it goes well.  Just treat it like a business and open both eyes and ears as wide as possible.  If it smells bad, it's rotten, simple as that especially in the food industry.

[SmokinLoon]

I can comment on being self employed, but not on anything to do with a coffee shop-

First- Be as frugal as you can possibly can be for the first few years.  Be prepared to live without things you want or normally would have just to get that extra $50 back in to the business.

Second- Trust me, do not F with your taxes.  The IRS wins, always.  I highly suggest you pay an accountant to do your taxes.  Find one that specializes in small businesses.  Trust me on this one.  Do not under any circumstances screw with your taxes. 

Third- Get involved in your local Chamber of Commerce as well as other local business groups and make those connections!  Just having a local group of guys meet at your shop for a meeting can lead to tons or new business and repeat customers.

BEST OF LUCK!!!!  Work hard, be smart, and remember me once you earn your first million bucks in a few years, all this advice isnt free.   

Good luck.    

[Anodizer]

A good accountant will make sure you're covered on all ends and it's absolutely worth it to have one in any business situation..  Things get much more complicated tax-wise when you run a business..  Write-offs, deductions, credits, etc.  It's especially imperative to have an accounted when you are running a restaurant.. 

[stroker71]

Thanks for the replies...i will look into an accountant for sure.

Rolex: We are not buying the business per say...we are buying the equipment and changing the name. He don't own the building so we will continue to rent that. We are going to LLC a name then DBA it back because it's a well known local restaurant. Running it shouldn't be a problem as my wife has worked there for along time...it's just I don't want to make the same mistake the last guy did. 

ROC: HARSH!! Bet your a good Dad...Facts just the facts!!  lol I understand what your saying and respect it. Truth be known all we have to do is set it up right because it's being given to us as a gift and not from the current owner. We will have 0$ invested for anything from the start. So as long as we make sure we don't inherit the old tax obligation we won't be out anything if it fails...hopefully.  The reason I came here to ask is to get a better rounded info...I was planning on an accountant anyway was just trying to get a feeling. We are very good about our personal finances so it was only the taxes I was worried about. I am keeping my full time job and my wife plans to keep her current pay and hours till we get a feel for the business.

DuHasst

[RTHolmes]

yes you need both legal advice before you take the business over, and accountancy advice when you are running it.

[ap1102]

You better make sure he owns the equipment. If he didnt pay taxes its a sure bet he may not have paid on the equipment. If theres a lien filed it may be just a matter of time before someone shows up to collect their equipment. The other posters are correct you need to tread carefully and slowly to make sure you dont make a hugely bad decision that you will regret for a long time to come.