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Throughout your journey as an entrepreneur, you can be hit with all kinds of different penalties. Sometimes, you get a slap on the wrist and a warning for doing something wrong. Other times, you’re guilty of something a bit more serious, and there’s a fine to pay. Or, you don’t get a fine, but another kind of financial penalty.
In a world where money and profit margins are everything, being forced to fork out some cash is never helpful. Many businesses have actually failed and gone under because they were hit with penalties so severe they couldn’t afford to pay them and still run the business. Are there ways of preventing financial penalties for your business? Absolutely. How can you prevent your company from getting hit with any fines? Start by understanding some of the common ways your business can face financial penalties. We’ve listed a few below, so give them a read and ensure your company doesn’t receive any bills in the post.
Tax Fines
All businesses need to pay tax every year. Not only that, you need to pay it on time – and you have to pay the right amount. Failure to pay any tax, failure to pay the right amount of tax, or failure to pay tax on time can all lead to fines and fees.
Interestingly, the IRS actually has three separate tax penalties:
- Failure to file
- Failure to pay
- Interest
Failure to file is a penalty given to anyone that didn’t even submit a tax return for their business. It’s calculated by taking the number of days between the deadline and when you actually filed, taking 5% of your tax return for each month you’re late. This can only go up to 25%, meaning you could pay a quarter of your tax bill as a fine!
Failure to pay comes if you file a tax return but fail to make a payment on time – you get a 0.5% penalty for every month your tax isn’t paid in full. Interest penalty fees are for anyone who underpays or fails to pay their full tax bill. The current rate is around 4% per year.
Obviously, you can avoid all of this by knowing when to file a tax return, when payments are due, and how much you owe.
Lawsuits
Next, your business can end up with all kinds of financial penalties through lawsuits. There are many ways your business can be sued, be it copyright claims, wrongful termination of employees, or discrimination in the workplace.
However, the most common and likely way your business will be sued is through personal injury claims. Firms like Mitch Grissim and Associates deal with personal injury cases all the time, including ones involving commercial vehicles and workplace accidents. When you create a business, you become liable for the safety of anyone that comes into contact with your company. If someone injures themselves on-site – or through your products/services, they have a right to claim compensation.
How can you avoid lawsuits? Start by providing a thorough service and ensuring you always give the best to your customers. Avoid skipping steps and cutting corners as this will almost always end in someone getting hurt and suing you.
Health & Safety Fines
The United States Department of Labor has some pretty hefty fines relating to the OSHA (Occupational Safety and Health Administration). Primarily, all employers have to follow the guidelines outlined in the OSH Act, which basically details how you can make your workplace safe for everyone.
Failure to comply with regulations can result in fines that amount to thousands of dollars. It depends on how severe the violation is, and how frequently you’ve done it before. To give you some context as to how big these fines can be, the maximum penalty of certain violations can be as much as $136,532 per violation. As you can imagine, this is enough to cripple a business financially!
The good news is that you never have to pay these fines if you abide by the OSH Act. It’s really not a big challenge at all, so you have no excuse not to follow it. All you really have to do is make your workplace a safe place for employees, customers, suppliers – and anyone else that ventures down there.
It is possible to receive penalties for other things, but the majority of fines or financial penalties will fall under one of the three categories above. Use this post to get your head screwed on and figure out how to prevent falling victim to fines that can damage your business.
