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What impacts can a tax lien have for a small business owner?

There are certain situations that could have the potential to create significant problems for a small business owner. One of these is if tax troubles arise that lead to the Internal Revenue Service issuing a tax lien against them.

When facing a tax lien, promptly seeking advice from a tax lawyer can be a crucial step for a small business owner. Their hopes for their own future and their small business' future could rest on how their tax situation is ultimately resolved.

How could a tax lien put a put a small business owner's goals for the future in jeopardy? Well, for one, such a lien could have many negative implications for their business. When such a lien is in place on a small business owner, it could impact:

  • Their ability to get needed funding for their business. This is because a lien can impact a small business owner's credit, which could impede them from being able to secure a loan or other financing to help inject funding into their business if it is needed.
  • What sorts of actions they are able to take when it comes to their business. A federal tax lien typically attached to all of a small business owner's property. This can include the property of a business they own. Among the things a piece of property having a lien on it can impact is the ability to sell that property. So, a tax lien could greatly restrict what sorts of options are available to a business owner when it comes to their business.
  • Their business' standing among the community, customers and other businesses. Among the things that come along with a federal tax lien is the IRS making a public notice of the lien. Such public notice could impact public opinion about the business in the community and among customers and businesses the small business regularly interacts with. Such reputation damage could affect a business' bottom line rather severely.

The effects of a tax lien on a business can linger for awhile, sometimes long after the lien itself is ultimately resolved.

And this is just the impacts such a lien could have on a small business owner's company. Such a lien could also deeply affect a small business owner personally.

Source: Internal Revenue Service, "Understanding a Federal Tax Lien," Accessed Aug. 10, 2016

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