Sole Practitioners - how do you practice?

Sole Practitioners - how do you practice?

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A quick question for the sole accountant practice folks; are you working as self-employed or as a Limited Company?

I originally planned to start of as self-employed, just to see how things go, and then probably move on to being a Limited Company. I intend to vet potential clients very closely, to make sure that I have the skills to be able to provide everything that they need.  The risk-averse part of me keeps worrying though. What if..... someone feels the need to sue me, my PII company finds some way of weedling out of providing any cover and I end up losing everything I ever worked for! Do you ever worry about this or am I just too much of a worrier for my own good :)

Replies (9)

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By jon_griffey
18th Oct 2013 14:31

Start as you mean to go on

I would be inclined to start off with the correct business entity rather than change later on.  It is a real hassle getting all the contracts, insurances, stationery, letters of engagement, 64-8's etc changed.

A limited company does not necessarily stop you being sued personally but you can put something in your letter of engagement to say that clients agree not to sue directors/employees in a personal capacity.

I seldom come across accountants in small firms getting sued I think the risk is fairly low compared to other occupations so don't be frightened off but stick to what you know and make sure you have good insurance cover.   Not just 100K of cover - if it goes wrong it can go wrong big.

 

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By girlofwight
18th Oct 2013 22:52

Agree
Jon's reply covers things well, and I would agree.

The risks are low - specially lower still with sensible PI cover and proper disclosure of practice profile - however there's a lot to be said for getting the right structure at the outset. I've established two practices now, and haven't regretted incorporation from the outset.

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Locutus of Borg
By Locutus
19th Oct 2013 00:54

Good advice from above
You may as well start off trading through a limited company, especially if you are worried about the potential risk.

I was worried about getting sued when I started, but 12 years on no one has tried to or even said they were really unhappy.

Stick to what you know, have a reasonable amount of PI cover in place, have good engagement letters, don't take on any old client, weed out ones that turn bad and trade through a company.

That ought to protect you against 99.9% of risks.

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Glenn Martin
By Glenn Martin
19th Oct 2013 20:14

I am similar set up and trade as a company.

I was not so much worried getting sued off a client but more the tax advantages of trading as Ltd Co as opposed to sole trade. I tell nearly all my clients to trade as companies so should practice what we preach really.

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By Jekyll and Hyde
21st Oct 2013 16:27

I am different to the norm.

I started practice some 9 years ago as a sole trader and incorporated in 2010. I sold my practice in 2012 and relocated for personal reasons.

I am now setting up another practice and have decided that I am going to go sole trader again.

I agree with the others in connection to being sued, which is one of the reasons I am happy to return as a sole trader. Settle back in for a couple of years, try and get my profits to a reasonable level and then review my structure options then, I might even incorporate a small equity partner and trade as a LLP..

Unlike others, I am unsure of where I would like my long term structure to sit and unfortunately not really knowing the local client market well. I know there is going to be change for me over the next few years anyway, whether it is location or structure and to be honest I would like to see myself merging with another practice within 3 years, once I can show what I am capable of as an accountant. Hence my move back as a sole trader.

My golden rule about taking on new clients, if you are unsure sleep on it, if in the morning you are still unsure, just say no. its not worth taking on a client if you are a) unsure about them or b) unsure whether you have the experience or structure to deal with them. I know that over the last 9 years I turned away potentially profitable clients, but being risk adverse myself I did not want to risk affecting my other clients.

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By David Gordon FCCA
22nd Oct 2013 12:04

i voted for limited

 

 The important point about limited is not the tax  but that you pay it after you know what it is.

 The non-tax advantages are; You personally avoid an enormous volume of junk mail.

 The ltigation thing is important.

 Just 'cos you have never been sued does not mean it won't happen. Do you insure against fire?

 

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By The Black Knight
22nd Oct 2013 12:16

don't think

I don't think the Ltd liability or LLP will protect you from being sued personally. You are a professional giving the advice. LLP or Ltd might however limit the damage spreading to the other partners.

Not convinced you can just sidestep negligence with the contract wording either, but I am open to being convinced. Can we all use a clause " We give advice at your own risk and you agree not to sue us if that advice turns out to be negligent"

the legal precedent was a surveyor I recall. (can't remember the name of the case)

You would need to inform your insurers of any risk or threat of being sued in time or you will not be insured.

But as for getting sued, The first thing a solicitor asks is do they have PI cover, when the answer is no badges so probably not. Then the costs of taking the matter to court outweigh the possible outcome.

If there's no Insurance to pay the legal fees the matter is dropped.

 

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Replying to clark.hall:
By jon_griffey
22nd Oct 2013 16:43

Suing employees

The Black Knight wrote:

Not convinced you can just sidestep negligence with the contract wording either, but I am open to being convinced. Can we all use a clause " We give advice at your own risk and you agree not to sue us if that advice turns out to be negligent"

the legal precedent was a surveyor I recall. (can't remember the name of the case)

 

The case  - the name of which I can't remember either related to an employee surveyor who got sued because he was the only man left standing when his employer went out of business.  The contract would be between the client and the firm, but the employee was found to be negligent.  This being the case it is possible to include a clause to the effect that the client agrees not to take action against individual employees, directors, LLP members personally.  They can still take action against the firm though.  We have had a clause to that effect in our terms for many years - it was OK'd by our current solicitors and counsel before them.  How watertight it is, who knows.

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By StartUpAcc
22nd Oct 2013 17:19

ICAEW engagement letter template

The first answer from Jon says it well.

 

The ICAEW engagement letter template has additional wording on claims including:

 

"you have agreed that you will not bring any claim of a kind that is included within the subject of the limit against any of our [principals] [directors] [members] [or employees]; on a personal basis."

 

No harm in including this, and other wording on claims. If the client doesn't want this wording included, then I personally wouldn't take them on as a client.

 

p.s. I incorporated - practice what you preach

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