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What You Need to Know About Offering Legal Advice

May 1st 2018
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When clients are pleased with your services, they will naturally want to entrust you with more of their needs. But what happens when they ask you to take on work that is beyond the scope of your financial and compliance services?

For example, say you have a client who is currently operating a business as a sole proprietor and now wants to form an LLC. Although you want to help (after all, it would bring additional revenue for your practice), you’re afraid you might put your business at risk by giving the appearance of “practicing law without a license.” This would be a valid concern.

The fact is CPAs (unless they are also attorneys) may not provide legal guidance or services that require a law license. So how can you help?

Helping Without Stepping Over the Legal Services Line

A member of a Facebook group that I manage recently posted a discussion on this topic and asked the question if any of the accountants in the group prepare and file business formation documents for their clients. She was approached by her clients about performing those services and worried that it might put her in legal hot water.

Fortunately, that would not be the case if she approached the situation correctly. Accountants may not give advice about liability ramifications of the various business entity types, but they may give any advice about the effects a business structure will have clients’ tax obligations.

Several examples of what accountants may Not offer advice about include:

  • What are the personal liability advantages of changing from a sole proprietor to an LLC?
  • What should clients include in their operating agreement?
  • Which state will offer the most favorable legal environment for a corporation?

Several examples of what accountants may offer advice about include:

  • Will pass-through taxation, S Corporation tax treatment, or taxation as a corporation be most beneficial financially to a client who is forming an LLC?
  • What options does a general partnership have if its owners want to lower their self-employment tax burden?
  • Which states offer the most favorable tax rates for a corporation?

Accountants may also to take information from a client and transfer it to the state via the required business registration documents. The tasks of preparing and filing the paperwork are something clients can do on their own or enlist the help of someone else to do for them.

The person handling those activities is merely acting as a scribe. Therefore, accountants may assist clients in completing and submitting a variety of forms including:

  • Articles of Organization
  • Articles of Incorporation
  • DBA (Fictitious Name) applications
  • Trademark applications
  • Annual reports
  • Registered agent renewals

Handling compliance paperwork can serve as a viable way to introduce a new revenue stream into an accounting business, provided no legal advice is given in the process. Some online document filing companies offer partner programs that enable accounting firms to implement the business form filing services into their practices.

It pays to exercise caution whenever working with a customer who asks questions about which business structure will be the best choice or wants your help with anything business compliance related. If you’re uncertain about whether you’re crossing into territory that’s legally out of bounds, I recommend consulting an attorney for guidance.

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