5 Reasons You Shouldn't Rely on Business Advisors
As business people, we have learned to rely on professionals of all types to have the knowledge and experience to give us good advice and do the tasks we can't - or don't have the time - to do. But having business advisors doesn't mean you get to shut your brain off or avoid the responsibilities of owning a business.
Your Business is Your Responsibility
The bottom line: No matter who gives you advice, as a business owner you are the person - the only person - who is has the liability if something goes wrong. If your tax professional makes a mistake on your tax return and you owe more money to the IRS, you have to pay it. And then you must try to collect from your tax person.
Or, if you are sued because your attorney gave you bad advice, you still must go to court. And you may not be able to sue your attorney.
Here's why you can't rely on the advice you receive from business advisors like attorneys, tax professionals, and others:
1. The Advisor Doesn't Know Everything
That wonderful accountant you rely on might not have the latest information on tax credits that might help you cut your tax bill. Your attorney might have missed that class in law school and is too lazy to look it up. Your web person might be good at designing web sites but poor at SEO.
2. The Advisor Might Not Be Honest
Sad, but true. How do you know if your accountant is embezzling money from you if you don't know enough about keeping your business books to review what's been done? I'm not saying you need to understand all the intricacies of the tax code, but you do need information, enough to read and learn some of the basics.
3. The Advisor Is Human
They make mistakes. For example, an attorney once filed the wrong S corporation election form for my husband's business, costing him a good deal of money. Sure, we can sue for malpractice, but that costs more money. You need to know enough to ask questions and maybe get a second opinion.
4. The Advisor Might Not Be Available
In a business emergency, you might not be able to contact your accountant or your attorney. You might be in a transition between one accounting service and another. Your web service might file bankruptcy. Who knows? We can't count on anyone being around, so knowing what to do ourselves - and knowing where to get the basics - is still important.
5. You May Not Be Able to Pay for an Advisor
There are times in business when we just don't have the money to pay others. The one person I would pay above all others is a good tax preparer. But there have been years when I did my own business taxes. So you want it to be easy and not take up too much time. You certainly don't want to do your own legal work, and if you get sued, you certainly must pay for an attorney. But there are some legal filings you can do yourself, like registering a business name or applying for an Employer ID Number.
Having professionals to help you in your business is great. Do what you can do, and hire out the rest. You need to know enough to know
(a) when you need help,
(b) when someone isn't being honest (see #2 above), and
(c) to do it yourself if you have to.