Accounting & Bookkeeping & Small Business Forum

[boatman37210]

I live in the state of Tennessee. It is my understanding that unless you are a CPA you are not allowed to advertise yourself as an accountant or offering accounting services. You are not allowed to use the word accountant in any form.

Does anyone know if this is true? Have any of you run into this in your state and does it create a problem for building your business?

Thanks.

Mike

[Richard Noot]

boatman37210 wrote: I live in the state of Tennessee. It is my understanding that unless you are a CPA you are not allowed to advertise yourself as an accountant or offering accounting services. You are not allowed to use the word accountant in any form.

Does anyone know if this is true? Have any of you run into this in your state and does it create a problem for building your business?

Thanks.

Mike

check with the Tennessee State Accounting Board in Knoxville. Some states do limit the use of the term accounting or accountant to CPAs only. While there you should also check what the safe harbor language is in your state.
This is the language that you as a provider of bkkpg services should put on any financial statements that you provide to your clients or on behalf of your clients.

[boatman37210]

(b) “I (we) have not audited, reviewed or compiled, under professional standards prescribed for such services, the accompanying financial statements and accordingly do not express an opinion or any other form of assurance on them. I (we) am (are) not licensed by this state, as a certified public accountant, public accountant or accounting firm, to provide those types of services.”


There is another paragraph to the safe harbor language, but the one above is the one that bothers me the most. It basically tells the client I don't know how to prepare financials and they are most likely not correct.

Preparing tax returns does not require you to be a CPA, yet. But in order to prepare tax returns you have to prepare a statement of income and expenses per the tax laws. Not per the FASB. That's were the term "book vs tax" comes in. Looks like to me since preparing tax returns does not require a CPA, you should be allowed to produce financials in accordance with the tax code if your going to be allowed to prepare tax returns. I know one CPA that keeps his clients books per the tax code. Thats all his clients arer interested in. How much did I make and how much of it does Uncle Sam get. Does not make any sense to me.

This gets back to my original question. Do any of you have to place safe harbor languange like above on your financials and does it cause any problems? Those of you who do not have to, do you think it would?

Thanks.

[Richard Noot]

boatman37210 wrote: (b) “I (we) have not audited, reviewed or compiled, under professional standards prescribed for such services, the accompanying financial statements and accordingly do not express an opinion or any other form of assurance on them. I (we) am (are) not licensed by this state, as a certified public accountant, public accountant or accounting firm, to provide those types of services.”


There is another paragraph to the safe harbor language, but the one above is the one that bothers me the most. It basically tells the client I don't know how to prepare financials and they are most likely not correct.

Preparing tax returns does not require you to be a CPA, yet. But in order to prepare tax returns you have to prepare a statement of income and expenses per the tax laws. Not per the FASB. That's were the term "book vs tax" comes in. Looks like to me since preparing tax returns does not require a CPA, you should be allowed to produce financials in accordance with the tax code if your going to be allowed to prepare tax returns. I know one CPA that keeps his clients books per the tax code. Thats all his clients arer interested in. How much did I make and how much of it does Uncle Sam get. Does not make any sense to me.

This gets back to my original question. Do any of you have to place safe harbor languange like above on your financials and does it cause any problems? Those of you who do not have to, do you think it would?

Thanks.

Mn language is similar to TN If anything it has enhanced my service to my clients. It shows them that the services that are provided by CPAs are overkill and unneaded in their circumstance. Would you pay to see
a surgeon for the treatment of the flu or would you go to your family physician instead?? Nowhere in the statute does it say that you are not a
professional or that you do not know what you are doing. Safe harbor language not only protects the client but also you as the bookkeeper. It tells anyone reading the statements that the figures are the representation of management and have not been verified or audited. Normally the only time that an audit is required is when it is a C corp that
will be selling its stock on the open market or when someone might be purchasing a going concern they might want the books audited. These types of businesses are not part of our normal client base.

[Richard Noot]

Preparing tax returns does not require you to be a CPA, yet. But in order to prepare tax returns you have to prepare a statement of income and expenses per the tax laws. Not per the FASB. That's were the term "book vs tax" comes in. Looks like to me since preparing tax returns does not require a CPA, you should be allowed to produce financials in accordance with the tax code if your going to be allowed to prepare tax returns. I know one CPA that keeps his clients books per the tax code. Thats all his clients arer interested in. How much did I make and how much of it does Uncle Sam get. Does not make any sense to me.

Actually you can prepare financials according to tax law. In fact their are
standards that can be adopted that are designed especially for this purpose. You can go to the NSA (National Society of Acccountants) website for more info.

[boatman37210]

Do you think financials prepared per tax code would require safe harbor language?

Since there are two standards, book and tax, I'm not sure why you would put safe harbor language that pertains to book when the financials were prepared per tax standards. The financials were prepared according to standards. Just not the standards that suppoedly only a CPA knows.

Hope I'm not belaboring this issue, but it has been a sticking point for me for some time. I'll check out that site.

Thanks.

[hpalmer]

Having just finished the bookkeeping course (and passing!), I was eager to get started marketing myself. However, I put the brakes on when I heard that some states (like Texas) do not allow the term "accountant" or "accounting" to appear in the business name or, in some cases, even the description of services offered, without being a CPA. No sense in spending money on business cards and stationary, if the powers that be were to come at me later and tell me I was not legally able to use that word(s). So, I emailed Wisconsin State Licensing and asked them about it. I described the services I would be offering as a sole proprietor, plus the fact that I understood the role of a CPA and would recommend one to any client/potential client who needed one. I also said I was aware of the differences in services offered and would not "cross the line" or misrepresent myself. It took several attempts, talking with several people, and at least two weeks, but I finally got a reply. They said it was legal to use those words, and actually gave me their blessing in starting my new business. I was relieved... and immediately ordered my stationary. :D

[Richard Noot]

boatman37210 wrote: Do you think financials prepared per tax code would require safe harbor language?

Since there are two standards, book and tax, I'm not sure why you would put safe harbor language that pertains to book when the financials were prepared per tax standards. The financials were prepared according to standards. Just not the standards that suppoedly only a CPA knows.

Hope I'm not belaboring this issue, but it has been a sticking point for me for some time. I'll check out that site.

Thanks. Even TAGSB guidelines tell you to confer with your state law.

A law will allways supersede any standard or regulation.

[Richard Noot]

hpalmer wrote: Having just finished the bookkeeping course (and passing!), I was eager to get started marketing myself. However, I put the brakes on when I heard that some states (like Texas) do not allow the term "accountant" or "accounting" to appear in the business name or, in some cases, even the description of services offered, without being a CPA. No sense in spending money on business cards and stationary, if the powers that be were to come at me later and tell me I was not legally able to use that word(s). So, I emailed Wisconsin State Licensing and asked them about it. I described the services I would be offering as a sole proprietor, plus the fact that I understood the role of a CPA and would recommend one to any client/potential client who needed one. I also said I was aware of the differences in services offered and would not "cross the line" or misrepresent myself. It took several attempts, talking with several people, and at least two weeks, but I finally got a reply. They said it was legal to use those words, and actually gave me their blessing in starting my new business. I was relieved... and immediately ordered my stationary. :D

CONGRATULATIONS. Wisconsin needs good accountants since they no longer have a good football team.

GOOOOO VIKINGS

[hpalmer]

I sure hope Wisconsin needs some good bookkeepers/accountants! BTW, I'm actually a Bear Fan, having lived in Illinois and all. Makes it fun living in Packer country. So, we'll see you guys Sunday in Minnesota (Sept. 24)! This could be interesting, since my son just moved to Minneapolis...

[bottomline]

boatman37210 wrote: Do you think financials prepared per tax code would require safe harbor language?

Since there are two standards, book and tax, I'm not sure why you would put safe harbor language that pertains to book when the financials were prepared per tax standards. The financials were prepared according to standards. Just not the standards that suppoedly only a CPA knows.

Hope I'm not belaboring this issue, but it has been a sticking point for me for some time. I'll check out that site.

Thanks.

I prepare the "books" based on GAAP, and FASB. When preparing tax returns you use the "tax rules" If you do business accounting for management purposes (the "book" method) you use GAAP. If you prepare financials for tax reporting purposes, you prepare in accordance with tax code. If you know both, you have no problem. No one can complain about financials or tax returns that are prepared properly. If you don't know GAAP don't claim to be a bookkeeper. If you don't know tax rules, don't prepare tax returns. It is as simple as that.

[Richard Noot]

[


I prepare the "books" based on GAAP, and FASB. When preparing tax returns you use the "tax rules" If you do business accounting for management purposes (the "book" method) you use GAAP. If you prepare financials for tax reporting purposes, you prepare in accordance with tax code. If you know both, you have no problem. No one can complain about financials or tax returns that are prepared properly. If you don't know GAAP don't claim to be a bookkeeper. If you don't know tax rules, don't prepare tax returns. It is as simple as that.[/quote]

I agree with you that if you don't know tax law you should not do taxes.

However it is not necessary to use GAAP when doing the financials for
small businesses. Although the accrual method is more accurate than the cash basis for mgmt purposes the cash basis can sometimes suffice.

[bottomline]

Richard Noot wrote: [ I agree with you that if you don't know tax law you should not do taxes.

However it is not necessary to use GAAP when doing the financials for
small businesses. Although the accrual method is more accurate than the cash basis for mgmt purposes the cash basis can sometimes suffice.

Of course it is necessary to keep books according to GAAP, cash or accrual basis, if you are doing the books for a business that is incorporated (LLC, Partnership, C Corp, S Corp, etc.) This is one of the requirements of a corporation. They are legally required to keep their books in accordance with GAAP or they lose the protection of the corporate veil.

[Richard Noot]

Of course it is necessary to keep books according to GAAP, cash or accrual basis, if you are doing the books for a business that is incorporated (LLC, Partnership, C Corp, S Corp, etc.) This is one of the requirements of a corporation. They are legally required to keep their books in accordance with GAAP or they lose the protection of the corporate veil.[/quote]

I think you need to know the meaning of GAAP. No corps and partnerships
do NOT need to keep books according to GAAP. They can use the cash basis.

For any business to be in compliance with GAAP they must use the accrual basis. Like I said there is nothing that requires a business to use an accrual basis.

[bottomline]

Richard Noot wrote: I think you need to know the meaning of GAAP. No corps and partnerships do NOT need to keep books according to GAAP. They can use the cash basis. For any business to be in compliance with GAAP they must use the accrual basis. Like I said there is nothing that requires a business to use an accrual basis.

What GAAP means:
The common set of accounting principles, standards and procedures that companies use to compile their financial statements. GAAP are a combination of authoritative standards (set by policy boards) and simply the commonly accepted ways of recording and reporting accounting information.

Yes, you are correct in that a company does not have to use the accrual basis (unless they have inventory) and yes, full compliance with GAAP requires the accrual method, and no, GAAP is not required by law (unless you are publicly traded, then the SEC requires GAAP and the accrual method). However, GAAP (other than using the accrual basis) are still the recommended way to compile information.

GAAP are imposed on companies so that investors have a minimum level of consistency in the financial statements they use when analyzing companies for investment purposes. GAAP cover such things as revenue recognition, balance sheet item classification and outstanding share measurements. Companies are expected to follow GAAP rules when reporting their financial data via financial statements. If a financial statement is not prepared using GAAP principles, be very wary!

GAAP Assumption
Economic Entity Assumption assumes that the business is a separate entity because the revenues and expenses should be kept away from personal expenses. This applies even for partnerships and sole proprietorships

I need to correct my previous statement that companies need to be in compliance with GAAP to protect their corporate veil. The following are actual requirements"

"Corporate Requirements

Corporations are subject to a number of other ongoing requirements and formalities. History has dictated that such requirements must be satisfied in order to protect the corporate status. These formalities include, but are not limited to:

Hold initial meeting of directors. After the formation of the corporation is complete, the corporation should hold an initial meeting of directors, also called an organizational meeting. At this meeting, the bylaws are adopted, officers are elected, and stock is issued to all shareholders. Adopt bylaws after incorporating. Each corporation must adopt bylaws, which is a document that outlines how the internal affairs of the corporation will be executed. The bylaws are the second most important document behind the articles of incorporation, as it indicates how the company will be operated. As mentioned above, the bylaws should be adopted at the initial meeting of directors. Conduct business on the corporation's behalf. Officers and directors should visibly be acting on behalf of, and in the best interest of the corporation. This is very important when it comes to officers or directors entering into contracts for the corporation. Hold annual meetings of directors and shareholders. One requirement of all corporations is that they hold annual meetings of both directors and shareholders. It is also important that the minutes of these meetings be kept with the corporate records. If items of business are determined by unanimous consent in lieu of holding a meeting, which is popular with many closely-held corporations, the unanimous consent documents should be kept with the corporate records. Keep documentation of corporate activity. In addition to keeping minutes of all director and shareholder meetings, it is important for corporations to maintain a stock ledger that records all shares of stock issued to shareholders and the contributed amount each share represents. Also, be sure to keep contracts into which the corporation enters, including leases or major business contracts. Keep documentation of corporate financial activity. Corporations should record all disbursements, payments received, invoices issued (accounts receivable), and invoices received (accounts payable), and keep those records for a period of 7 years.
Corporations should also keep balance sheets and profit and loss statements for each year. Additionally, it's important to document any loans taken by the corporation, as well as the repayment terms.

LLC Recommendations

While LLCs do not have the formal ongoing requirements that corporations have, it is recommended that LLCs undertake many of the same steps.
(Remember, these recommendations are to protect the corporate veil )Common recommendations for LLCs include:

Hold an organizational meeting. After the formation of the LLC is complete, the members or managers should hold a formal meeting to adopt an operating agreement and issue membership interest to members. Adopt an operating agreement. As with the corporate bylaws, the operating agreement for an LLC is an important document that outlines the internal governance of the LLC. Keep documentation of the LLC's activity. It is typically considered beneficial to keep record of any changes in membership interest and also to keep record of all major business decisions of the LLC, such as contracts and leases. Keep documentation of financial activity. LLCs should maintain the same financial information outlined above for corporations. Hold annual meetings of members. Holding and documenting the business conducted at annual meetings of the members or managers helps LLCs keep updated ongoing records of decisions made by the owners.