Incorporation Mistakes–Orange County Accountant Skirts Potential Tsunami

(Music) I had a meeting with a CPA last week. He had formed about 30 corporations for his
accounting clients. Then he ran across the articles that I’d
written and watched a few of my video tapes, and he started to worry. He wasn’t absolutely certain he had completed
all of the corporate formalities correctly. And he didn’t want to find out that he had
done it wrong either mid audit or mid lawsuit. He told me that he realized it was going to
cost him a small fortune to perhaps fix all of the problems that had been created, but
he realized how that was going to be better than the alternative. He was prepared to do whatever was necessary
to make certain that his clients were taken care of. Now it’s not uncommon, in my experience,
when I meet people that are starting businesses that they want to try and cut every corner
to save every expense that they can when getting their business off the ground. And a lot of times what they do is they put
pressure on their trusted advisers, like their CPAs or their tax accountants, to help them
save the cost of legal fees in getting the business started. So on occasion, CPAs and tax accountants will
fall into the trap of actually doing legal work, thinking, “It’s just a few forms,
and I can fill it out.” Or, “I’ll have my secretary use an incorporation
service like legal zoom, or something like that,” and they create these entities thinking,
“Well it hasn’t run into a problem yet, and so this one will probably be okay too.” Of course it’s okay until it is a problem,
and then you have a tsunami on your hands, not some small problem that you can easily
fix. Now when we receive these corporate record
books to look at, it’s very common that they’re incomplete. They filled out forms that they didn’t need,
or they filled out forms they need incorrectly. Or maybe they haven’t filled out forms that
they should have filled out and the documents aren’t assembled in the proper order. They don’t have the complete set of corporate
records which one would expect. What happens when they get themselves involved
in an audit or a lawsuit? They go into complete panic mode. And a lot of times, the CPAs will say, “Well
just quick, type up some minutes or type up some paperwork, and hopefully that will get
us over the curb.” This is not only bad advice, but now they
have compounded the problem. “So what do I do now?” he asked me. What I explained to him is that it’s not
uncommon at all for people to try and do the incorporation process themselves, because
they’ve read on the internet that it’s very simple, or there are a lot of these do-it-yourself
services that have spent a lot of marketing money online. Then when you look for incorporation services,
page after page of the Google research findings show you that you can do it for fifty or one-hundred
bucks, and they fall into the trap. And they don’t know what to do once they’ve
screwed it all up. We’ve created a program in our office. Which we call our Corporate Record Review. It will allow us to help them go through their
corporate records, look to see what’s there, look to see what’s missing, look to see
what needs to be corrected, and then we can kind of guide them through that process to
make sure all of the things that should have been done have been done. So I indicated to him that the easiest thing
for him to do would be to allow us to look at each one of the corporate record books
that he had created. We would run it through our 27-point checklist
to make sure that all of the things that should have been done for the client and haven’t
been done can be completed now before there’s a problem. So he said, “Just figuring out the problem
is going to cost me a fortune. What do I do about that?” I assured him this is very simple. I said I would help him go through all of
his record books. I would do the review. I would tell him whether or not they were
complete and perfect, in which case there is no more work to be done. Or that we could identify what the problems
were. I could give them a budget to fix it. Then, we could explain to the client that
some extra work needs to be done on their corporation to make sure they have that corporate
veil liability protection in place. We could step in and help him help them make
sure that their corporate records are absolutely perfect. I explained to him that I would do this at
no charge to him. At no charge to the client. It was just a function of knowing better would
allow him to do better for his clients and knowing better would allow his clients to
do better for themselves. So here’s my offer to you. If you’re an accountant. If you have done the legal work of forming
a corporation for your client. If you have doubts whether or not you did
it correctly, or if your secretary or assistant did it for you and you’re concerned whether
or not they did it correctly. Or, if your concerned whether or not the records
that should have been done on a year to year basis have been done correctly, I’ll tell
you. I look at this as though we are partners. I’m a professional in the legal world. You’re a professional in the tax world. And both of us need to get together and help
one another so we can really help out our clients. This is completely without risk to you. And you will know once we are done meeting
and going over your files whether or not you’re in a good position or not a good position
and we can now take the steps to correct that. (Music)

Leave a Reply

Your email address will not be published. Required fields are marked *