There’s an overlap between accountants and lawyers when it comes to LLCs. How should you decide who to ask about questions regarding your LLC? The answer really comes down to your question. You should keep firmly in mind that the two professions serve quite different aspects of running a company. The training each receives colors their views and opinions.
Accountants Are Trained In Numbers and Tax Issues
Trained in tax, numbers, and profitability, accountants tend to be concerned over the tax structure, tax issues, and particularly tax planning. These areas are traditionally the role of your accountant. While there are tax attorneys, there are many more accountants and it’s really common to use an accountant. We use a C.P.A. for our law firm tax issues. We aren’t tax lawyers and don’t pretend to be. When one of our clients is considering setting up an LLC, we highly recommend consulting with an accountant ahead of time to get sound tax advice.
Your Attorney’s Focus Is Legal and Liability
Lawyers are educated about the law and trained in ways that accountants aren’t. Legal questions are more appropriate for an attorney who is experienced in business and civil litigation matters. It helps to remember that if your LLC is challenged (there’s an attempt to pierce the LLC veil and come after you personally), it’s most likely going to be determined in court. While attorneys may take a couple of tax courses in law school, tax law is not the primary focus of legal training. So for issues that might result in a legal challenge or attack on your LLC, get a lawyer!
In our view, questions that involve taxes and accounting are for a C.P.A. or a qualified accountant. Problems can arise when your attorney isn’t willing to send you to the accountant for tax advice. Likewise, accountants don’t necessarily consider the risk to your LLC from legal proceedings. Accountants tend to see more audits; lawyers see more litigation. Legal questions about your LLC really should go to your attorney.
The Right Advice Really Depends On Your Goals
A few years back, we counseled with a client in some areas of risk and created a strategy to limit exposure should a motor vehicle accident take place. Like many companies that have a lot of drivers on the road, there was a concern over what might transpire if there wasn’t enough insurance. About a year later, we were surprised to find out the strategy had the rug pulled out from under it.
The client was completely unaware the risk plan had been demolished by following the advice of the company’s new accountant. It was the classic case of too many cooks in the kitchen and one professional offering advice without considering the other important interests of the other.
When the risk plan was set up, the client used a different accounting firm. We had discussed the tax considerations as well as the risk of liability issues. Following several phone calls, meetings, and e-mails, the collective agreement was to go forward with the strategy giving legal liability the priority over the tax considerations.
The next year, issues arose between the accountant and the client. A new accountant was hired who didn’t know the history and apparently didn’t ask why things had been arranged the way they were. Placing focus on purely the income tax implications, the new accountant made suggested changes to the entities and structure. These changes eliminated the very protections the client paid us to put in place. Troubling to us was the fact the new accountant seemingly thought he knew about risk, liability, and the courthouse.
You Should Weigh The Tax Considerations Compared To The Legal Issues
Bear in mind that it can make perfect sense for your business to weigh risks and determine that taxes are a higher priority. We see clients all the time who choose a tax strategy over a liability one. The client should decide what’s best for the LLC. However, accountants and lawyers should both be careful when making proposed changes to a business model. Both accountants and attorneys need to advise the client to see what the other one says also.
We tell our clients (almost like a broken record); be sure to check with your accountant before we make the changes. We usually offer to call the accountant or join a telephone conference before a new plan is implemented. At the end of the day, we believe in the team approach with both disciplines working together to provide the very best solution.
Give your LLC tax questions to your accountant and give the legal issues to a competent attorney. Don’t make the mistake of assuming attorneys are giving complete consideration to your tax situation or that your accountant is really evaluating your legal risks.