How to Settle Old Business Debts

The laws for settling old business debts within the United States will vary from state to state, and the Fair Debt Collection Practices Act governs how debts can be collected. Forming a business in various states such as Nevada is not difficult, as the state's government tries to attract investors to establish a business there, but the laws regarding business debt is more stringent.

Confirm A Contact Address

Confirming a registered address with creditors is one of the first steps. Debtors should give a registered office address, or another physical address where creditors can contact you. Some states might not have required the previous company to have a local state physical address. However, when working towards clearing the debt, at least have a mailing address as required by the Federal government.

Open A New Business Bank Account

In some states, debtors can have personal funds seized by the courts. Have a new account in which to make debt repayment from. Some states would have required business owners to open a bank account within the state before doing business there. For example, other states such as New York require this. It is easier for the state to obtain money from the company's bank account if there are legal issues, or unpaid debts. Various states such as Nevada also do not require that company executives and directors hold board meetings within the state. This is handy for corporate investment executives who are located in another country, but not handy when the executives owe money for taxes.

Contact The IRS

One particular area of concern with any company settling debts in the United States is the privacy law. Most states do require company information such as debt amounts and names of directors to be disclosed, and the information that corporations reveal is reported to the Internal Revenue Service. Make an inquiry to the IRS for information on any taxes owed, if they have not contacted you already.

Pay Outstanding Franchise Tax

Another way to settle any debts is to pay any outstanding franchise tax. When setting up an old business there might have been a requirement to pay franchise tax. Any your state's department will be able to tell you if your old business debt include unpaid franchise taxes.

Concluding Remarks

In 2010, the average small business had a mountain of debt in serious areas such as unpaid IRS taxes or behind in building rent. A number of them eventually had to consider legal advice for liquidating their business, and/or declaring bankruptcy.

Get Legal Help First

However, the information provided above is only to be used as a guideline for settling old business debts. However, as the this procedure is quite complex, it is recommended you seek advice from an experienced attorney about your specific situation.