Unemployment Tax

So I believe this is my first official gripe on this website.
I got a letter about the previous owners company being delinquent on their unemployment tax. Since they used our inn name as their business entity name, I wanted to get that straight, so I called. Well, I ended up talking to a supervisor who told me that he would take care of that, but after looking at our account, we did not pay enough. Instead of the 3.7% that new businesses pay, we have to pay 12.8% per quarter!! Why!?! Because someone at our business took unemployment benefits many years ago, so the deficit is more than what was paid! So we have to pay for someone taking unemployment before we even bought the business!!! AAAAGH!!
I would never have even thought to look for that when I was reviewing financials. It wouldn't have been a deal-breaker, but I would have liked to have known.

Welcome to the club. We didn't incur the debt but this business name owes the state $12,000 in back unemployment bennies. We will never pay that back. We pay about $200/year in unemployment money. At the highest rate going. (Altho not as high as your rate!)

Some friends bought the equipment of a closing restaurant here a few years ago. They opened it as a new business with a new name, but the state wouldn't issue a sales permit to them until they paid past due sales tax not paid by the previous restaurant. They said the state computer has that address flagged because so many doing business there have not paid in the sales tax they collected on sales.
It took action by our state senator to finally get the state to admit that the new business isn't responsible for the money owed by a previous business in the same building.

Morticia said:

Welcome to the club. We didn't incur the debt but this business name owes the state $12,000 in back unemployment bennies. We will never pay that back. We pay about $200/year in unemployment money. At the highest rate going. (Altho not as high as your rate!).

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WOW that really doesn't seem fair. Why should you be responsible for something from previous owners? Surely something that should have been found out prior to purchase and some sort of agreement reached. Beware aspirings who purchase existing businesses...don't forget to find this out for sure.!

EmptyNest said:

Morticia said:

Welcome to the club. We didn't incur the debt but this business name owes the state $12,000 in back unemployment bennies. We will never pay that back. We pay about $200/year in unemployment money. At the highest rate going. (Altho not as high as your rate!).

Click to expand...

WOW that really doesn't seem fair. Why should you be responsible for something from previous owners? Surely something that should have been found out prior to purchase and some sort of agreement reached. Beware aspirings who purchase existing businesses...don't forget to find this out for sure.!
.

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EmptyNest said:

WOW that really doesn't seem fair. Why should you be responsible for something from previous owners? Surely something that should have been found out prior to purchase and some sort of agreement reached. Beware aspirings who purchase existing businesses...don't forget to find this out for sure.!

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No it's not fair but we took over an existing business, kept the same name and like a lot of other stuff, you inherit the past debt if you didn't know about it and we certainly didn't know enough to find it. Neither did the broker, the lawyer or the accountant mention it.
When we spoke to the state they said they could do a search to see who got the money but what were we going to do, sue them? And, it was $40/hour to do the search. (Which would have taken all of 2 minutes but we would have been charged for several hours of 'investigating'.)
I can understand it because people shut down businesses and then reopen in the same location with the same principals but a different name. They do it over and over to get out of paying whatever they owe. So the good people suffer the consequences of their misdeeds.

Morticia said:

EmptyNest said:

Morticia said:

Welcome to the club. We didn't incur the debt but this business name owes the state $12,000 in back unemployment bennies. We will never pay that back. We pay about $200/year in unemployment money. At the highest rate going. (Altho not as high as your rate!).

Click to expand...

WOW that really doesn't seem fair. Why should you be responsible for something from previous owners? Surely something that should have been found out prior to purchase and some sort of agreement reached. Beware aspirings who purchase existing businesses...don't forget to find this out for sure.!
.

Click to expand...

EmptyNest said:

WOW that really doesn't seem fair. Why should you be responsible for something from previous owners? Surely something that should have been found out prior to purchase and some sort of agreement reached. Beware aspirings who purchase existing businesses...don't forget to find this out for sure.!

Click to expand...

No it's not fair but we took over an existing business, kept the same name and like a lot of other stuff, you inherit the past debt if you didn't know about it and we certainly didn't know enough to find it. Neither did the broker, the lawyer or the accountant mention it.
When we spoke to the state they said they could do a search to see who got the money but what were we going to do, sue them? And, it was $40/hour to do the search. (Which would have taken all of 2 minutes but we would have been charged for several hours of 'investigating'.)
I can understand it because people shut down businesses and then reopen in the same location with the same principals but a different name. They do it over and over to get out of paying whatever they owe. So the good people suffer the consequences of their misdeeds.
.

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Well at least I hope this will serve as notice for future innkeepers who stop by here. Check to see if there are outstanding business expenses BEFORE you sign on the dotted line!

Wow. That seems odd. Of course around here Employment Insurance is a government self-financed mutual insurance. We can't even pay into it, because we aren't eligible to draw from it. But why would you be responsible for someone else... let them go after that business... or did you buy the business and not just the house?

Set up your own LLC or C-Corp when you buy the business. NEVER buy their business entity. Our sellers were "Phineas Swann Bed & Breakfast LLC." We declined to buy their LLC outright and instead formed our own C-Corp which has a different name. We are "<Corporation name> d/b/a/ Phineas Swann Bed and Breakfast" but the corporation is not named Phineas Swann.
So inevitably, when people, the state, the feds came to us in the months after closing with past amounts due, we simply said, "Not our company. The principals of THAT company can be found here at (forwarding address and phone number).
Thus endeth the lesson for future innkeepers.

PhineasSwann said:

Set up your own LLC or C-Corp when you buy the business. NEVER buy their business entity. Our sellers were "Phineas Swann Bed & Breakfast LLC." We declined to buy their LLC outright and instead formed our own C-Corp which has a different name. We are "<Corporation name> d/b/a/ Phineas Swann Bed and Breakfast" but the corporation is not named Phineas Swann.
So inevitably, when people, the state, the feds came to us in the months after closing with past amounts due, we simply said, "Not our company. The principals of THAT company can be found here at (forwarding address and phone number).
Thus endeth the lesson for future innkeepers..

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We did NOT buy the corporation, we bought the business and the registered business name (d/b/a) . it didn't make a hill of beans difference to the state who owned the business. The debt was run up under the business name, NOT the corporation we bought from.

PhineasSwann said:

Set up your own LLC or C-Corp when you buy the business. NEVER buy their business entity. Our sellers were "Phineas Swann Bed & Breakfast LLC." We declined to buy their LLC outright and instead formed our own C-Corp which has a different name. We are "<Corporation name> d/b/a/ Phineas Swann Bed and Breakfast" but the corporation is not named Phineas Swann.
So inevitably, when people, the state, the feds came to us in the months after closing with past amounts due, we simply said, "Not our company. The principals of THAT company can be found here at (forwarding address and phone number).
Thus endeth the lesson for future innkeepers..

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We DID! We had our own business entity buy the assets. It was a business entity that has been in business for several years prior to the purchase. The guy at the state department said that it doesn't matter, that is you buy over a certain percentage of the assets that the liability transfers as well.

SAME THING HERE! 11.1% rate due to previous owner deficit. I did NOT buy the business, only the property. I'm a C corp, and they were an LLC. The state did say if they did not disclose it, that I can bring it to court, and they will typically award to the buyers. I'm not the suing type, but this isn't chump change we're talking about. I've paid in over $4k so far that I should not have.

LogCabinResort said:

SAME THING HERE! 11.1% rate due to previous owner deficit. I did NOT buy the business, only the property. I'm a C corp, and they were an LLC. The state did say if they did not disclose it, that I can bring it to court, and they will typically award to the buyers. I'm not the suing type, but this isn't chump change we're talking about. I've paid in over $4k so far that I should not have..

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We thought about that as well. It wasn't disclosed to us, but I don't think it was intentional. Since we only have one employee, it is not a huge amount. Just burns me up on principle.

ChrisandShelley said:

LogCabinResort said:

SAME THING HERE! 11.1% rate due to previous owner deficit. I did NOT buy the business, only the property. I'm a C corp, and they were an LLC. The state did say if they did not disclose it, that I can bring it to court, and they will typically award to the buyers. I'm not the suing type, but this isn't chump change we're talking about. I've paid in over $4k so far that I should not have..

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We thought about that as well. It wasn't disclosed to us, but I don't think it was intentional. Since we only have one employee, it is not a huge amount. Just burns me up on principle.
.

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Because the PO's were paying this off already we're sure it was deliberate. We were too stupid to know and none of our supposed 'team' of broker, lawyer, banker or accountant thought about it. Still burns me.

Perhaps the ONLY advantage to being a start-up is there is nothing hidden.