Discussion:Should I provide Incorporation Services?

From TaxAlmanac, A Free Online Resource for Tax Professionals
Note: You are using this website at your own risk, subject to our Disclaimer and Website Use and Contribution Terms.

From TaxAlmanac

Jump to: navigation, search

Discussion Forum Index --> Business Growth Community --> Should I provide Incorporation Services?


Cyberdom (talk|edits) said:

27 June 2013
A client is in the process of forming a not for profit corporation and ask me to help.

I wonder any one of you (as CPA)providing incorporation services. I remember some firms I used to work would outsource it to other incorporation service. I plan to do it myself. Do you think it is too risky?

I knew I can prepare Form 1023 but not sure if I should get involve in the incorporation part if it is just forming a regular corporation. Am I opening up a can of worms?

Thanks ahead for your opinions.

SunwunLost (talk|edits) said:

27 June 2013
Would you be indulging in the unauthorized practice of law? Here in NC, they went after Legal Zoom a while back, using that very argument.

NMexEA (talk|edits) said:

27 June 2013
You can probably prepare, file and sell incorporation packages in your State but you probably can't offer advice about the legal details of Articles of Incorporation or by-laws. You can advise as to the tax consequences of one or another business form but you (theoretically) can't recommend one form of organization over another on the bases of, say, shareholder liability or control. You can use preprinted forms but not alter them or draft new forms nor can you select among forms for your client.

I have never understood or agreed with these limitations on free speech but I have occasionally seen UPL charges in connection with these issues. That's the Legal Zoom problem.

Fsteincpa (talk|edits) said:

27 June 2013
If you do, I would make sure you inform the client that you are not allowed to give legal advice. That you can only discuss the entity selection from a strictly tax standpoint, that the legal questions should be held for a lawyer and also for their insurance agent from a liability exposure standpoint.

I do provide incorporation services. I always have them also sit with a local lawyer for a one hour consultation. We explain all the different entity types and what they mean from a tax standpoint. We do not make any decisions for our clients. We also explain to them that it is quite easy <in NY> to incorporate and they can easily just go to the Dept of State website and do it themselves. We view this similar to preparing a tax return. Filling in information as provided by client.

I have also counseled clients that after talking to their insurance agent and lawyer, they may find that their business poses no real liability threat and that by simply increasing insurance coverage, they will be fine.

I have no problem doing it. Others will come down with fire and brimstone condemning you for even thinking about it.

CathysTaxes (talk|edits) said:

27 June 2013
I always tell prospective clients that if they want to go LLC or incorporate, to see an attorney. I tell them there are a lot of requirements for corporations and they need to know what they have to do (I'll give them a few examples, like the corporate minutes book and the accounting plan for expenses).

When they try to get me to do their articles of incorporation, I tell them no way. I also tell them to talk to their insurance agent about business insurance.

Fr. Mackelhenry (talk|edits) said:

1 July 2013
The state of GA is very strict about it, but I'm not aware of any enforcement actions on this issue. If there is an enforcment action initiated, they usually settle things with a consent order.

I don't see how you could ever get in trouble for discussing tax issues with a client and then the client could use one of the services to incorporate. One thing about entity law, the more you know about them, the less you might want to give legal advice. I would not feel comfortable givng advice on the legal issues of setting up and running a non profit, and I'm a lawyer. I've taken one CLE class in the subject area and it wasn't enough to keep me forever up to date....of course. I don't know all the legal angles of LLCs either.

Make sure to explain to the client that there is a lot more law involved in the area than merely setting up the entity, as most of you know.

Tax Writer (talk|edits) said:

1 July 2013
I do not offer this service, However I've worked for three CPA firms. Two of the firms offered incorporation services and one of them did not. They would only file the paperwork and request the EIN, etc. Basically filling out paperwork, the equivalent of LegalZoom except for the fact that the taxpayer was not the one filling out the actual paperwork. The price ranges were from $900 to $3,000 depending on the level of complication (multiple shareholders, etc).

It's not something that I would ever do, but I know a lot of CPAs that do it.

Fr. Mackelhenry (talk|edits) said:

1 July 2013
For instance, a death can start the lawsuits flying: heart attacks, auto accidents, pedestrian accidents. The client may have partners and a surviving spouse, and one or another party my feel screwed by a messy set up, or claim the tax person should have told the deceased x, y or z about the entity, and all the fingers could end up pointed at you. The (expected) unexpected events can upset the apple cart like this. On the other hand, 85% of the lawyers out there today know nothing about this area of the law, so if they do go to a lawyer for advice, tell them to make sure they get a competent one.

Cyberdom (talk|edits) said:

10 July 2013
Thanks for all your valuable advice and reminders.

I actually want to focus on helping startup company so this part is one of the service that I offered or subcontracted out to an attorney (or may be referred to them). I believe NYS (the state that I am in) stated that you do not need to engage an attorney to incorporate but they recommend that you do.

I found an engagement letter that have paragraphs indicating clearly to the clients that I am not an attorney nor am I giving my client any legal advice.

Thanks again for everyone.

Fr. Mackelhenry (talk|edits) said:

10 July 2013
I found an engagement letter that have paragraphs indicating clearly to the clients that I am not an attorney nor am I giving my client any legal advice.


That's fine, unless you in fact Do give legal advice, then the letter is worthless. As a priest, I am completely chaste, and no engagement letter will make me into a Don Juan or Casanova. I was shocked to read that Casanova actually seduced some of our dear nuns. True. This shows what a wiley rascal he was. After their seduction, the nuns declared themselves to be completely satisfied (some said they were thoroughly satisfied), and they refused to pay attention in church and they would not mind their priests.

Example: if I merely prepare a deed, I am giving legal advice. It's a sneaky subject this is. In my state, you cannot "subcontract" to a lawyer if you are a non-lawyer, a lawyer cannot share fees with a non-lawyer.

NMexEA (talk|edits) said:

10 July 2013
If you do start offering incorporation services, make very, very sure that your clients understand the limitations on sales of unregistered securities. The "kits" used to contain suitably endorsed stock certificates but I don't know if it's still done that way.

You can't advise on this issue but you can be sure they READ the endorsement or some other written notice.

Cyberdom (talk|edits) said:

26 July 2013
I found this sample engagement letter online and modify it for my client to sign.

http://http-download.intuit.com/http.intuit/CMO/mycorp/docs/State_and_Federal_Filing_Engagement_Letter.doc

To join in on this discussion, you must first log in.
Personal tools