As an accountant, starting a company for your client can be an exciting opportunity to utilise your expertise and help them achieve their entrepreneurial dreams. However, there are common mistakes that many accountants make when forming companies for their clients that can lead to costly consequences and potential legal issues.
So, as leading providers of company formation services for accountants, we’re discussing the top five mistakes often made when starting companies for accounting clients and providing practical advice on how to avoid them. Whether you are a seasoned accountant or just starting, this blog will provide valuable insights to help you navigate the complexities of starting a company for your clients and explore how the team here at Company Registration Online can assist.
1. Choosing the Wrong Business Structure
Choosing the wrong business structure can negatively affect both the client and the accountant, so it’s essential to ensure that the right structure is chosen when setting up a company.
Different business structures come with different legal and financial liabilities. For example, a sole trader has unlimited personal liability, which means the owner is personally responsible for the debts and obligations of the business. On the other hand, a corporation has limited liability, which means the shareholders are only liable for the amount of their investment. Therefore, if the wrong structure is chosen, the client may face more legal and financial risks than necessary.
As such, it’s important for accountants to carefully consider all the factors and advise their clients on the most appropriate structure for their specific needs and goals and here at CRO, we can help you do just that as part of our company formation offerings.
2. Failing to Register the Company Properly
When accountants fail to register a client’s company properly, it can have serious consequences, for example:
- Legal issues. If the company is not registered properly, it may not have the legal protection it needs, and the owners may be held personally liable for any debts or legal issues that arise.
- Loss of credibility. A company not registered properly can lose credibility with customers, suppliers, and investors, making it much more difficult for them to attract business or investment.
- Wasted time and money. When a company isn’t registered properly, it may need to go through a lengthy and expensive process to correct the mistake, which can be a significant waste of time and money for the company and its owners.
Luckily, our Company Registration Packages offer everything you need to ensure your clients’ companies are registered correctly. This includes a range of services, all completely bespoke to your clients, guaranteeing that they are registered and managed properly.
3. Not Conducting Proper Due Diligence
Due diligence refers to investigating and evaluating a potential business opportunity or investment to ensure all relevant information is available and risks are identified and assessed.
If this isn’t conducted properly, it can lead to legal risks (such as fines and penalties) for both the client and the accountant, as it may not be properly registered, licensed, or compliant with relevant laws and regulations.
In addition, if proper due diligence is not conducted, there may be operational risks associated with the company. For example, the company may not have adequate insurance coverage or may not be structured in a way that is sustainable over the long term, leading to operational failures or disruptions down the road.
4. Overlooking Compliance Issues
If compliance issues are overlooked during the company formation process, it can lead to several negative consequences for the company and its stakeholders. For example, if the company fails to pay taxes or other mandatory fees, it may have to pay interest and penalties, which can affect its financial health.
Not only this, but non-compliance can damage the company’s reputation in the market, leading to a loss of trust and confidence among the stakeholders, including customers, investors, and employees.
Finally, failure to comply with regulations can lead to operational disruptions, such as delays in getting licenses or permits, which can affect the company’s ability to operate.
Luckily, our Company Formation Packages offer everything you need to ensure you comply as an accountant setting up a company for a client. This includes 12 months of managed company secretarial services, which ensures legal compliance.
5. Failing to Offer Ongoing Support
No matter which industry you fall into, when setting up a company, there is a lot to think about, which is why accountants offer the service for their clients to take away some of the burdens. However, while getting you set up is helpful, sometimes they can fail to offer the necessary ongoing support, leaving clients in the dark and confused about what to do. Failing to offer ongoing support after forming a company can have several negative consequences for clients, such as the aftermentioned compliance issues. Companies are subject to various legal and regulatory requirements, and without ongoing support from an accountant, clients may fail to comply with these requirements, which can result in penalties and fines.
In addition, accountants can provide valuable advice and insights that help clients take advantage of new opportunities and make informed decisions, and clients may miss out on these opportunities without ongoing support.
Here at Company Registrations Online, we have extensive experience dealing with accountants who want to set up companies for their clients, making us the ideal place to go for everything you need in this field. We can offer support, provide the necessary documentation, offer secretarial services, and more.
Please get in touch if you need our help, and a member of our team will be more than happy to point you in the right direction.