We’re a medium business with about 100 employees/contractors at any time, located in Michigan. The company I work for has had some financial difficulties and I think it’s mostly related to mismanagement of funds… the owners pay all their bills, mortgages, etc, out of the company accounts and then end up having trouble meeting payroll. I had to hold one of my most recent pay checks for over a month because there were no funds available. Meanwhile the owners are paying loans on 7 cars for their friends and family out of the company account and the primary owner just bought a 2 million dollar home out of state and the company is paying the mortgage every month. They have debit cards and pay for most of their personal purchases that way. None of them pull salaries but they still seem to live extremely comfortably.
I’ve been working here for 8 years now so it’s not so easy for me to just quit and find a new job… but I’m curious to know about the legalities of what appears to be a huge misuse of company funds, especially when it’s impacting all the other employees.
Well, you know, it’s perfectly legal for owners to withdraw funds from their own company SO LONG AS such withdrawals are properly recorded on the company’s books. (I kind of doubt that this is what is happening in your company though – the withdrawals are probably being placed into various expense accounts rather than being recorded as money withdrawn by owners, which they would have to pay personal tax on). Who does the books or accounting? Whoever it is, he or she is probably making unethical entries. Non-business use assets like houses and personal cars have no place on the company books, hence the bookkeeper/accountant is calling them something else on the books to make them look like company assets. (If one understands the ‘ins and outs’ of accounting, this is in fact very easy to do).
It’s kind of a catch-22 situation. The owners probably owe a huge amount of personal back taxes for monies taken but not reported to the IRS. If you were to inform the IRS of a potential illegal situation and the IRS comes to have a closer look, it may result in the ultimate failure of the company – and you would be out of a job, just like all the other employees.
I would just say hang on and meanwhile start looking for a job elsewhere. Not every company plays it as ‘fast and loose’ as your current company apparently does.
(Has it always been like this? Or is this a more recent development?)