Tuesday, October 16, 2007

8 Reasons Your Business Needs Accounting and Legal Professionals

The highest and best use of time for an effective CEO or General Manager is to develop an organization that is focused on sales growth and profitability. A close second priority is to navigate the business successfully through a labyrinth of complex laws, taxation issues, accounting issues, and regulations. Regardless of the size of the business it makes good business sense to have an independent accounting firm and legal firm on your team.

Here's some of the reasons why:
  1. You don't know what you don't know. By getting an accounting firm and a legal firm on your team you'll have a better chance of success.
  2. It takes more than a check book to know what's happening in your business. It takes financial statements and what's more, they need to be accurate and timely. Financial statements can be expanded to reveal the profitability of each line of business or each location. With high quality information about the various aspects of your business, it's easier to make correct decisions.
  3. Taxation is complex . First there's planning to minimize taxes to keep more cash in the company. There's all types of taxes – sales taxes, property taxes, income taxes, estate taxes, etc. There's also the issue of compliance with various deadlines and filings. And don't forget the importance of paying taxes “on time.” Most compliance issues are accompanied by heavy financial penalties for “getting it wrong.” And you guessed it – most penalties are not tax deductible.
  4. Organizing the flow of transactions can be critical to reduce the chances of embezzlement and fraud and to obtaining accurate data. Accountants are familiar with how to handle a division of responsibilities to help assure better financial control. Even in cases where there's a trusted and competent accountant in your company, it makes sense to “verify” the data through an accounting firm. In a sense the accountant is a “your knowledge source about the business.” How good is the data? Many a company has been wiped out by failing to verify that the accounting systems are working properly.
  5. Accountants do not practice law and vice versa – lawyers are not accountants. It takes both to run a successful business. For many issues it takes teamwork to find the right solutions for your business since taxation and legal issues are often intertwined. For example, how your business is organized is one of those issues.
  6. Lawyers are invaluable when it comes to conducting business. From the time you decide to organize a business, lease an office, buy real estate, hire employees, enter a contract or resolve a dispute you need legal advice. When you're new at business it's initially shocking how a lawyer reads even “simple” agreements differently from ordinary business people. “Legal” issues are real issues and their subtleties are practically beyond comprehension. A lawyer is the key to understanding them, the key to avoiding being taken advantage by others and the key to avoiding traps and pitfalls that exist in abundance.
  7. Compliance issues exist in law just as it does for taxation. The United States is a nation of laws and just about every business and every business activity is regulated. In addition, each and every state has its counterpart, and each and every local government has its own laws too. Also just about every law has its “team of enforcers” who are focused on their specialty.
  8. An accounting firm and a legal firm can preserve your wealth. When you are successful at accumulating assets there are plenty of groups focused on taking it away:
    • Criminals - from inside or outside your business
    • Taxing authorities
    • Litigants – from inside or outside your business
    • Competitors
In short, lawyers and accountants help you keep what you earn.

Source: http://www.attorneyaisle.com/


Gail Robertson said...

Nice post. I want to run my own business soon, so I'll remember this one. I know it'll be challenging, so I can use all the help and advice I can get. I've been thinking about buying a business lately instead of starting one from scratch. Maybe a franchise? I don't know. Do you have any suggestions or advice? Thanks!

Erin W. said...

@Gail - If you're thinking about buying a business, there are bunch of websites that offer the service. I know there's BizTrader.com, which is this online global marketplace where you can buy and sell a business. It has excellent tips and advice, and you can also use it to find a lender, broker, etc. I also highly suggest checking out any small business groups in your area. They can be very helpful, and it's always good to network. Good luck!

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