Formations debate: Jordans opening statement

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To kick off AccountingWEB's company formations debateJordans puts its argument in favour of the motion, "This house believes that accountants need to get more involved with company formations to add value to their client relationships."

For easy, straightforward company formations, Companies House web incorporation can be a good choice. But, and it’s a big but, we believe that for anything slightly more complex, accountants should get more involved. This is where we think with our expertise we can support the accountant.  The layman can’t necessarily tell what’s simple or easy. At Jordans we know the right questions to ask.

The cost of getting it wrong at the beginning can be high. We are prepared to dedicate time to ensure the accountants and their clients make the right choices.

It can be incredibly difficult to sort out problems later as one of our clients is currently discovering. The two members of the company thought that as they held 51% of the shares they were assured control of the company. Details of the share rights showed this was not the case.

The Companies House web incorporation offering may be suitable for one-man band arrangements with no plans for expansion, but it will not suit more ambitious or non-standard companies.

For a busy accountant, Jordans can take the pressure off. With our outsourcing solutions we act as extra members of your team. We are doing this for a number of large and small accountants at the moment. We also “white-label” services for some practices and formation agents wanting to offer a tried and tested formations package.

We take a flexible approach to how clients want to deal with us. You can always talk to us if you want to. On the other hand if you’d rather deal with our technology-driven solutions we can arrange that too.

Text alerts for clients, provision of an INO1e with all the incorporation information (otherwise only available via a search), specialist electronic formations that cannot be formed via Companies House use technology to strengthen your relationships with clients.

The market may be changing but some issues in business never go away.

Next week Formations Direct will be putting forward its arguments against the motion. What is your stance on the formations debate, and what points or questions would you put to the proposer of the motion?

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13th Mar 2012 13:05

First response

As the resident Company Secretarial editor around here (!) I am going to start this debate off by saying that I disagree with the motion - as it stands: “This house believes that accountants need to get more involved with company formations to add value to their client relationships.”

In my view how much accountants should become involved depends on what is needed by the client and the knowledge of the accountant.

My article Company incorporation: Get the details right covered the different methods of company formation (Companies House DIY versus the Company Formation Agents), detailing the pros and cons of each and as I stressed - the value of using company formations agents is for non standard matters. If clients are sole traders then the Companies House DIY route is fine. It’s quick; easy to follow and costs only £18. If there are going to be more than two directors then a company formation team should be considered not least because (particularly in Jordans’ case) they have been around for so long that there is probably no problem or directors’ need they have not come across.

Jordans’ comment that “The cost of getting it wrong at the beginning can be high” is spot on. You only have to read the recent case of Smith v Butler 2011, which we discussed in our recent AGM webinar, to see the importance of getting it right on commencement. We’ve all come across this scenario: friends set up in business and everything goes fine until something happens and they end up not speaking to each other. In a marriage there are divorce lawyers. In a company there are only the articles and if the particular problem is not covered then it can be very expensive untying the knot.

I would also query Jordans’s claim that the Companies House route is “suitable for one-man band arrangements with no plans for expansion, but it will not suit more ambitious or non-standard companies”. You can start with one ambitious director full of plans for expansion via the Companies House route and then add to the articles as necessary.

As the Jordans text states a company formations agent is a valuable back-up team for the smaller accountant with no specialist adviser on hand, especially if something other than the setting in place of a basic company is needed (for example in the drawing up of shareholders agreements - see my article how to get these right) They will also be cheaper than consulting a specialist solicitor.

Accountants are already becoming increasingly involved in company secretarial-type matters, proof of which can be found in reading questions on Any Answers (and why AccountingWEB asked me to write artices under the heading). But I would say that accountants should know their limitations and know where to go if stuck for an answer.

It will be interesting to see what arguments Formations Direct comes up with to oppose the motion.


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13th Mar 2012 12:22

trouble is

Client's now days come to you after they have formed a company on line, not understanding why apart from that it was cheap and easy and their friend did it, because it saved tax. Not that they know how or why it should save tax, but you just need to call your salary dividends.

If you really want to milk the tax advantages trade for two years take your money and the nice men at companies house who don't like HMRC will strike it off for you thus protecting you from HMRC chasing for the tax. Probably nicely laundered too.

And you might think this dangerous but no 1) HMRC are not interested 2) Companies house are not interested. When things do go wrong the lawyers fees will see that any resolution is unobtainable even if criminal offences have been committed (which no one is interested in either) Sad I know but the Companies Act 2006 is a waste of paper.

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