Legal and accounting are the only professions that complement each other in every business industry. However, from years, these professions have always been in the controversy across the business world in order to establish which is more important. These two professions differ in their unique challenges, specific degrees which are licensed from the state government, and services offered by them.
Many entrepreneurs don’t know how to use these professionals at every stage, and without thinking for a second, they take the risk, which ultimately leads to the insolvency of businesses. First, understand the importance of these professions and then make a better decision.
So, Let’s Start with the Legal Profession!
Whenever entrepreneurs ground up for their businesses, they have to meet the legal team to stay compliant in the business environment. Keeping the business secure from every legal obligation can enable you to run your business for a long-term.
Top 4 Legal Challenges faced by a Business
1. Successfully Registering the Business
For successfully registering the business, one has to go through a lot of paperwork and legal formalities which are discussed as under:
Getting a license for your business: A business license and special permit (for some) is required before you can execute the business operations.
Registering your business: DBA or “doing business as” name is required to register your business.
Choosing the legal structure: This structure is all about the tax filing procedure and the role of different team members in it with the following business structures to choose from:
- Sole Proprietorship
- Limited Liability Company (LLC)
Getting a Tax Identification Number: Tax or employer identification number (EIN) enables IRS to track your business taxes and is extremely vital for a business.
Registering for State and Local Taxes: Based upon your state and local tax rule, you would be required to register for various fiscal needs.
Patent and Trademark Application: Applying for a patent and trademark is essential if your business model constitutes a new invention or is highly brand specific.
2. Ensuring Seamless Contract Management
Make every team member to sign a contract with the definite inclusion of the following:
- Job title
- Job responsibilities
- Personal information
- Name of the company
- The direct report personal
- The payment schedule
- Pay rate
- Non-disclosure clause
- Hiree’s tax obligations (if applicable)
- Company benefits
When it comes to signing a contract you have to be cautious to avoid future disputes, therefore, refering to your contract management resources and seeking lawyers help will an ideal way here to get rid of these contracts as they will guide you at every facet so that you make a beneficial deal.
3. Protecting your Assets
If you have an intellectual property for which you would like to file a patent, legal professionals can help you at every footstep. Securing intellectual property is crucial so that no one can steal your unique business concept, copyrights, trademark, geographical location, etc., at any cost. Including the following sections in the agreement will definitely help you in the same:
- Method & schedule of payments
- Names of the involved parties
- Offered services
- The price
- Refund policy
- Confidentiality clause
- Contract termination points
- Venue for dispute settlement
4. Avoidance & Settlement of Disputes
Every business has to go through some sort of dispute during their lifecycle. It is important to get prepared for the same mentally as well as legally in order to avoid the disputes in the first place and if required, take appropriate steps to settle it.
So, if you have to face any business dispute in the future against contract breach from your partner or if any of your employees files a lawsuit against your business, opting for legal support services is the apt choice. Hiring a lawyer at the initial phase will help you to avoid such disputes in the future.
Now, Let’s Talk about Accounting
Accounting is the core of every business as, without an adequate amount of money, a company is unable to function properly. Being an entrepreneur, you don’t want to lose out to your competitors due to poor accounting which is considered as the biggest element for business failure. According to researchers, 93% of small businesses fail in their initial years because they neglect their accounting.
The following 4 points explain as to why having an accountant is essential in the first place:
1. Accurate Accounting Records
- Manage & Grow a Business: When records get managed properly by an accountant, you can easily focus on your core business activities
- The Organized Structure: When records are organized well, dealing with suppliers and customers along with producing quotations, invoices, and estimates are easy.
- Preparation of Management Accounts: You can easily get to know if you are making profits or facing losses by comparing one period to the other.
- Advance Tax Payments Planning: It is always sensible to plan the taxes in advance and this is only possible when the records are maintained regularly by an accountant.
- Easy Tax Filing: If regular record keeping can help you plan the taxes in advance, it will definitely make the tax filing an easy process.
- Avoiding the Penalties: Interests and penalties can be avoided for sure when you have a professional accountant working for you.
2. Gather Appropriate Market Funding
Initially, entrepreneurs have to gather funds and taking a loan from the bank is the only thing that comes to their mind. Taking a loan from the bank is a good option for sure but with the help of one of the following funding options, you can meet the funding requirements of your business as stated by your accountant.
- Term loans
- SBA loans
- Equipment financing
- Invoice financing
- Short-term loans
- Business lines of credit
- Angel investors
- Venture capital firms
- Friends & family
3. Cash Flow Management
The cash flow in every business should be well-maintained to secure the business against any cash crunch. Entrepreneurs have to maintain bookkeeping functions that include accounts payable, receivable, bank reconciliation and keep a record of every transaction daily. More so, prepare financial reports to analyze the financial position of the company and to plan the budget.
All this consumes time and demand expertise, therefore, seeking the help of an accountant can help you attain everything in one go. They can also help you with saving and budgeting strategies so that you can strictly adhere to that.
4. Timely Tax Paying
Tax preparation creates havoc in every business and making mistakes is very common. However, mistakes in filing the taxes can lead you to heavy losses because errors usually alert IRS and they may knock your door for a tax audit.
Thus, opting for accounting services is an ideal way to streamline your tax preparation tasks and further you can ask the CPA to file your tax. CPAs went through difficult training and exam in order to get a license, so be sure, they are super professional and knowledgeable in these things.
If works of both the professions are in tandem, that means your business and you are on the right track. This is a common sign of success as these professionals are available to serve you at every footstep, allowing you to build a strong business foundation.
You don’t have to worry about the changing legal obligations or IRS rules on taxes because lawyers and accountants always keep themselves updated with the changes in the country’s regulation and technology ruling the market. So stay focused, work hard, and explore your dreams!
Eliana Manon is a legal writer and marketer for Legal Support World, a California based LPO, since 2008. Providing legal back-office solutions to law firms and legal professionals nationwide, she is a certified attorney committed to providing information that lawyers need to make successful relationships with their clients.