Work with the Clients’ Lawyers. Make Money!
It is a truth universally acknowledged that accountants and lawyers are not always on the best of terms. Given that some lawyers know little or nothing about tax, you should maintain a good working relationship with your clients' lawyers. A simple example: Your client decides to form an S corporation. There are 9 other shareholders. Clearly a shareholders’ agreement is necessary. The lawyer will draft it, but you should review it. A partial list for review and comment should include:
A provision listing inadmissible transfers by a shareholder, for example, an individual who is a nonresident alien. (Also include a bucket provision which states that ANY transfer that would cause the termination of the S election is null and void ab initio.)
A provision that any shareholder who violates the shareholders’ agreement and causes the termination of the S election will indemnify and hold harmless the other shareholders for any damages they may incur (including taxes, interest, and penalties) because of the termination.
A provision stating the percentage of shareholders necessary to make the elections under Code section 1362(f)(4), Code section 1362(e)(3), Code section 1377(a)(2), and Code section 1368(e)(3).
If you review the shareholders’ agreement, you will not get that awful call from a now former client asking you why you didn’t review the lawyer’s draft of the shareholders’ agreement. The former client then tells you that the agreement (now final) was badly drafted.