Volume 11 Issue 2 -- March/April 2007
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
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
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
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
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.
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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