More Collaboration Needed Between Legal And Accounting Firms.

More collaboration needed between legal and accounting firms.

by

Daniel Roesgen

Too many

legal agreements are being drafted with nominal tax planning. Conversely, it is common to prepare financial documents without concern for legal situations like contingency requirements, breaching of loan agreements, up-to-date minute book documentation, and various compliance issues like corporate statutes and industry third party regulations. This Widespread Omission Could Bite Corporate minute books are among the first documents tax auditors request to confirm the validity of specific tax deductions such as bonuses. Since the minute books tend to be at the lawyers office, one hopes there are no mislaid documents or other glaring omissions. Issues that Beg Collaboration It is always beneficial to have the legal and accounting representatives of a company work closely together. There are many factors for this. Cooperation is the responsibility of the company owners and directors. One instance that should be looked at is that legal opinion is often important to confirm if certain accrued liabilities are actually necessary to be paid. This would disclose some surprising information. This task alone is invaluable if a shareholder wants to secure their shareholder loan to the company without being at the bottom of the totem pole. Small Business Requires the Same Level of Cooperation as Big Business The issue of standard General Security Agreements is something that needs a lawyer and accountant to collaborate. Legal and financial responsibilities these forms convey can be stressfull to say the least. Of course there is no such thing as an agreement that cannot be changed. It requires the collaboration of lawyers and accountants to think about the options such as letters of understanding to mitigate the potential consequences of powerful GSA\’s. The lawyers know the legal problems but they sometimes don\’t run the numbers to determine how simple it can be to be in technical contravention of contract with the lender. And the accountants don\’t know the implications generously provided by legal issues. This is an effective example and fascinating challenge of where your legal and accounting squad could gang up on your financial institution to have them appreciate that their \’normal\’ provisions and covenants should be more adaptable to the practicalities of running the business. Oh yes, the tax perspective. The fact that client privilege is only enjoyed by the legal community means that accountants tax planning memos and correspondence may perhaps fall into the hands of CRA, but given that they typically do not exist, it might not be a problem. However, if they were to exist, it might be best for your accountants and lawyer to discuss ways of communicating that would offer legal privilege for these phantom documents, an extreme but extremely worthwhile manoeuvre. Ken Lagasse, small business tax specialist, presents insider strategies to reduce taxes along with many other crucial money saving suggestions for Canadian small business owners and managers. Ken Lagasse

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