Newland's Business Notes



Native Speakers Do It

Volume 11 Issue 2 -- March/April 2007

Cole Porterís famous song, Letís Do It, says, ďBirds do it, bees do it . . . Letís do it, letís fall in love.Ē  There is another thing that people do, which is the opposite of falling in love and which is the subject of this newsletter. 

Do what?  Taking advantaged of native speakers from their ancestral language by, among other things, providing questionable advice.

If you speak Greek, Spanish, or Martian, it is natural to prefer to speak with someone who is fluent in your tongue. Consultants or advisors who speak the same language as those seeking advice have an inherent advantage.

Itís the same warm feeling one finds when going to an unfamiliar country where an unfamiliar language is spoken and being able to buy a train ticket by speaking your own language. Unfortunately, this tendency to look kindly upon one who speaks your own native tongue sometimes leads some advisors to take unfair advantage.

Rather than mince words, letís use a specific example from Virginia. Hank Azais is an accountant in Manassas , fluent in both Spanish and English.  He has many clients who speak primarily Spanish and is aware of situations in which Spanish-speaking individuals have been charged $1,500 by accountants to incorporate businesses.  Some of these Spanish speakers who have paid $1,500 to incorporate have received no advice and very few supporting documents.  In other words, they have not received much of what they paid for.

In fact, one client of Hankís who had incorporated and paid $1,500 before coming to Hank, was not even using the corporate entity for any purpose whatsoever.  This pattern is not shocking to Newland & Associates since we have seen the same pattern with other ethnic groups in Detroit and in Hawaii. 

The basic pattern is to charge $1,500 or more to someone ďjust off the boatĒ to form a corporation for them.  The person for whom the incorporation is done may not appreciate what has happened or how to use the new entity.  In some cases, he or she is misled into thinking that it is a necessary step in order to do business in the United States. 

Leaving aside the issue of whether the price charged is reasonable, what should a person, regardless of what language is involved, expect to receive for a business entity formation? 

In forming a corporation, LLC or other business entity, there should be some understanding, first, of why this step is being taken and what are the advantages of doing so. One common advantage is limited liability, which is discussed in newsletters on our Website, www.tax-business.com.

Commonly, we ask clients why they have incorporated. Sometimes the response will be ďBecause my accountant or lawyer told me to do it.Ē  That alone is not a good reason.  There should be some understanding or explanation of why the entity, if formed, will benefit the owner or owners. 

When there is more than one owner of an entity, a number of other matters should be considered.  For example, if itís a corporation, there should be a minute book containing the articles of incorporation, corporate bylaws and minutes. The minutes should indicate who the officers are and should contain any agreements or understandings among the shareholders. 

If itís an LLC with more than one owner, there should be an operating agreement spelling out many of the elements contained in a corporate minute book, such as voting among members, capital contributions, and the relationship between the parties. 

These matters can be critically important particularly if there are disagreements or a falling out among the members.  Remember, in times of strife, memories become extremely convenient. 

This newsletter should not be taken as a sweeping indictment of all those professionals or service providers who happen to be fluent in a second language.  The goal of this newsletter is merely to point out to practitioners and readers that sometimes abuses occur. 

As Cole Porter might have said, even eels do it, although they find it shocking.  It is hoped that this newsletter might help readers avoid being shocked by this particular pattern of abuse.

 If further assistance is needed, call Newland & Associates for advice regarding entity formation, rates, documentation preparation, and other business needs.



Copyright 2007

Published by the law firm of Newland & Associates, PLC
9835 Business Way
Manassas, VA 20110
Call us at (703) 330-0000 for a full range of business law and tax-related services.

While designed to be accurate, this publication is not intended to constitute the rendering of legal, accounting, or other professional services or to serve as a substitute for such services.

Redistribution or other commercial use of the material contained in Newland's Business Notes is expressly prohibited without the written permission of Newland & Associates, PLC.

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