I am posting something different to this blog to cap off an interesting 2021.
This post is actually from a post I made to another blog. I think it’s worth another post on this blog even though it’s not a match for the editorial standards usually applied to this blog. I hope it’s a decent read nevertheless despite a little irony, some figures of speech and some blowing from my own trumpet.
The blog was a comment in a thread on the topic of whether it was worth getting documents to form a company from a qualified professional:
Proprietary company setups are not all the same. The $512 ASIC registration fee doesn’t get you a constitution for your company. Company constitutions vary and are on a quality spectrum and quality can count just like with any product.
Is a company constitution worth having?
A company set up without a constitution gets a one size fits call called the replaceable rules which gives a bare bones way for the company, and those involved in it, to operate. One size fits all can lead to a unintended outcomes. For instance an often unforeseen, easy to trip, requirement is to notify other directors of a conflict of interest between a director and the company. A properly tailored company constitution can modify conflict of interest rules away from the one size fits all to suit a company where only mum and dad are directors. Failure to do this can get weaponised like, say, when directors get divorced. And don’t think that this is the only reason why the replaceable rules may be a poor fit for your company.
Getting a capital structure of a company right
I do work sorting out situations made worse because companies are not understood by those setting them up. A company’s ideal capital structure is a big issue when a company is acting in its own right and not a trustee. Unless you understand the impact of s112-20 of the ITAA 1997 on the issue of shares in the company you’re a big chance to pay more capital gains tax that you might have when you sell or exit out of a company that has grown.
Company capital structure fails can lead to unnecessary loss of small business CGT concessions for small business which can amount to a big economic cost where a company ends up being a good business.
Getting “my” money out of a company
Shareholders try to get “their” money out of a company following a poorly executed lawyer free setup is another world of grief which can ironically bring in the lawyers, the ATO and expensive insolvency specialists.
A reckoning on death
Lots of problems don’t show up until a shareholder dies. This is often when the problem comes to my desk. It is sad when a family is tied in knots because their company establishment going way back was stuffed up. Any company setup, whichever way, might seem the same through times of smooth sailing. Why bother with the pesky paperwork at all? Wait, too, until the shareholders divorce, a fight amongst shareholder ensues or there is trading or tax trouble with the company: a sudden turn of interest, then, in the company’s capital, structure and records.
The “professional services” industry – escape for profit
Most of the non-legal providers on the internet are suss. They are derived from the offshore tax haven shell company “professional services” industry or use their business model. ICIJ media gives you an idea of their ethics https://cutt.ly/oUO7bvW and how they help their customers deal with local rules and commitments (not). Their model is to hide and escape from them.
Company constitutions, trust and SMSF deeds and partnership agreements are legal documents, and these providers are there to help you escape from having to get them from a lawyer charging a fee who is ethically obliged to professionally prepare them and whose work is covered by a professional indemnity/negligence insurance to protect you. And what about these rights? What a solicitor must tell you https://go.ly/P0jLU Worth having?
Their model is often something like this: we are not lawyers, so we give you escape from lawyers with this service. But we offer documents which are (based on) documents authored by a lawyer.
Reality check on unqualified practice
However you take this double-think pitch on the merits of avoiding lawyers, a reality is that the model is illegal: see the Federal Court case of Australian Competition & Consumer Commission v. Murray  FCA 1252 https://jade.io/article/106192 to appreciate how documents supplied this way is from an unqualified legal practice source.
There is a misconception that lawyers in this space are not worth the fees. I, for one, reckon my operation is lean and mean. And there are others like me. Sure my company and trust setup services cost a little more because my setups involve me thinking about and taking responsibility for what I am asked to do, and guiding clients on their setup choices based on what I know about them and thirty-five years’ experience of the ever changing traps – and that can’t be done by AI, yet.
What you get
So I can’t “compete” with a non-thinking service which gives you a company, trust of SMSF setup from a sausage cutter: documents all done and delivered instantaneously, with your credit card charged just as fast. But you get my drift: this blindingly impressive service just may be just too fast, hassle-free and brain-free. Look at the fine print (hello accountants) about who takes responsibility for loss if anything, including data inputs for which the inputter is made fully responsible, turn out not quite right.
So I agree. It could be better to go to a dentist than the cheapest guy with a drill.