seperate entity?

[joanmcq]

I agree with John. There is a lot of danger of not looking at all of the documentation suggested, not the least of which is not doing due dilligence in preparing the tax return(s). You already know this is a mess. Don't perpetuate and further confuddle it. If you are not willing to do what needs to be done to prepare and advise this client correctly, you should steer them to someone who will. You are doing the client no favors by trying to simplify a complicated situation.

[tacks]

Thanks Joan, John & everyone else.

This is an education for me because this stuff is always done (or allegedly done) well before the account reaches me.

I will research this further and ask client for documents. I suspect that i'm in the clear based on my engagement letter and what the client has told me and shown me thus far. But again i will look at this closer.

thanks

[oceanlovin'ea]

I would say NEVER give a client a QB program. Most people don't know how to use it and therefore make more of a mess than is ever helpful.

If you are able to do the bookkeeping yourself, get all the bank statements, check register and copies of bills. Post everything yourself. It will take time but you will know that you have all the information and that it is correct.

That is just part of the solution.

Linda, EA

[Black Bart]

A daycare center is a corp with two shareholders, equal ownership, 50/50. The shareholders used corp funds to start a beauty salon which flopped.

Solution: create a 50/50 partnership for the beauty salon report the beauty saolon seperately. Record distributions to shareholders and/or shareolder loans in corporation.

Sound OK?...

Yeah, that sounds okay.

I think tacks has a good point. Treat a mom and pop shop like General Motors and you won't have them as customers for long. Most of 'em are honest but oblivious to paperwork. Usually they know they paid a lawyer (whose corporate knowledge is frequently limited to app completion) $500-$1,000 to incorporate them and paid the state a franchise fee, but that's all they know. Tacks' client's charter most likely exists but clients misplaced it or were never given a copy in the first place (the secretary of state will fax one for about $5). Other that that there won't be any minutes, board resolutions (unless they finance something), and much less likely were any questions ever asked about the legal authority to do this or that.

The beauty shop purchase is typical; if there's money in the bank to do what they want, then they don't sit down and hash over corporate rules and regulations -- they simply write a check. The way they see it, all the paperwork can be handled later after the fact. And it can (like making the check a shareholder loan); and 99% of the time nothing will ever come of any of it. The only reason I'd be seriously concerned about this is that expenses were $600K which indicates sales would be enough to make an audit worthwhile to IRS.

[tacks]

Hi Linda,

thnks again

I would say NEVER give a client a QB program. Most people don't know how to use it and therefore make more of a mess than is ever helpful.

If you are able to do the bookkeeping yourself, get all the bank statements, check register and copies of bills. Post everything yourself. It will take time but you will know that you have all the information and that it is correct.

Linda, EA

Appreciate the comments. While i serve my clients well i am NOT especially a good businessman. Having said that, and not to be arrogant, it's simply not feasible, at this point, for me to do bookkeeping/data entry. (heck, I've seen people less qualified manage a sizeable staff)

I take the approach of my father's accountant, "If you want to pay a CPA XX$ per hour to do bookkeeping then that's fine. That's your decision."

Hence i'll try to farm out bookkeeping. And currently i'm not even looking to set up clients w/ QB.

thanks all the same

tacks

[tacks]

Big thanks to Black Bart

A daycare center is a corp with two shareholders, equal ownership, 50/50. The shareholders used corp funds to start a beauty salon which flopped.

Solution: create a 50/50 partnership for the beauty salon report the beauty saolon seperately. Record distributions to shareholders and/or shareolder loans in corporation.

Sound OK?

Yeah, that sounds okay.

I think tacks has a good point. Treat a mom and pop shop like General Motors and you won't have them as customers for long. Most of 'em are honest but oblivious to paperwork. Usually they know they paid a lawyer (whose corporate knowledge is frequently limited to app completion) $500-$1,000 to incorporate them and paid the state a franchise fee, but that's all they know. Tacks' client's charter most likely exists but clients misplaced it or were never given a copy in the first place (the secretary of state will fax one for about $5). Other that that there won't be any minutes, board resolutions (unless they finance something), and much less likely were any questions ever asked about the legal authority to do this or that.

The beauty shop purchase is typical; if there's money in the bank to do what they want, then they don't sit down and hash over corporate rules and regulations -- they simply write a check. The way they see it, all the paperwork can be handled later after the fact. And it can (like making the check a shareholder loan); and 99% of the time nothing will ever come of any of it. The only reason I'd be seriously concerned about this is that expenses were $600K which indicates sales would be enough to make an audit worthwhile to IRS.

Big thanks to Black Bart. This describes my client very well. As expenses for the beauty salon will be less than 16K it's hard for me to pester the client about all this for such a small amount.