What you should do now
May 28, 2024
4 min read
An audit is a scary thing. The idea of government officials pouring over internal company records, micro-searching for financial incongruencies is enough to keep any business owner up at night. Fingers crossed it never happens to you. But sometimes it does…
According to the Canada Revenue Agency (CRA) website, during an audit, officers “closely examine books and records of small and medium-sized businesses to make sure they fulfill their obligations, apply tax laws correctly, and receive any amounts to which they are entitled.” An audit is a stressful process, often involving accountants, lawyers and frantic searches through old records. Ultimately, the goal of any audited party is to resolve the matter quickly and painlessly.
But quickly solving the problem requires corporate records to have been safely stored and updated accordingly. Naturally, the larger and busier a company, the easier it is to push these seemingly minute priorities down the list. Big mistake.
The CRA may ask to see the following records:
- information available to the CRA (such as tax returns previously filed, credit bureau searches, or property database information);
- your business records** (such as ledgers, journals, invoices, receipts, contracts, and bank statements);
- your personal records (such as bank statements, mortgage documents, and credit card statements);
- the personal or business records of other individuals or entities not being audited (for example, a spouse, family members, corporations, partnerships, or a trust); and
- adjustments made by your bookkeeper or accountant to arrive at income for tax purposes.
Corporate record books, commonly referred to as “minute books,” contain pertinent information as it relates to the status and well-being of the company. More often than not, minute books are physical binders that sit idly on law firm shelves. The binders contain the articles of incorporation, amendments, by-laws, original copies of share certificates share certificates, corporate ledgers, and other nondescript records.
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The minute book should be updated as necessary, but at the very least once a year. What often happens, however, is that because minute books rarely need immediate updating, they are pervasively out of date.
Certain company resolutions can include the authorization to issue bonuses or dividends to employees or shareholders. For obvious reasons, this is of interest to the CRA. Dividends and income are taxed at different rates. So if an individual declares a dividend payment on their personal taxes, yet the resolution authorizing the corporate dividend payment is missing (because the minute book was not updated), the CRA may issue a tax reassessment.
The truth is that while law firms may charge a nominal amount to regularly update a company’s minute book, it costs thousands less than what a law firm will charge to overhaul and update a minute book in the case CRA audit. To avoid problems later on, here are a few important steps companies can take to alleviate the minute book concern before the Canada Revenue Agency comes calling:
- Make sure you know the location of your minute book. The vast majority of all corporate minute books are kept at the office of the company’s law firm. If it’s not there, try and locate it quickly.
- Ask your law firm whether the minute book is up to date. If necessary, remind them of recent transactions, issued dividends and other corporate matters.
- If possible, use a digital or virtual minute book. Minute books are kept in physical format for no other reason than that’s how they have been traditionally stored. A virtual minute book (whether a scanned version of a physical binder or a series of PDF documents stored on an external server) is equally as valid as the traditional physical minute book under Canadian law. Signatures need not be in pen and ink to be legally binding. New tools allow law firms to store and update minute books on the cloud, so clients can access their up-to-date records and share them instantly. Ensure your law firm uses these new solutions for your minute books.
The truth is that no one plans to be audited by the CRA. But that doesn’t mean you can’t be organized if and when the time comes. Taking a few small steps today with your minute book can bring a little sanity and clarity to an otherwise hectic ordeal.
May 31, 2023
2 min read
The adoption and implementation of legal technology within law firms is becoming increasingly common. As technology continues to advance and change the way we work, law firms are recognizing the benefits and are becoming more open to using legal tech to streamline their processes and increase efficiency. However, while firms may be receptive to legal tech, the adoption and training of the technology can be a problem.
Here’s a summary of what we’ll look at in this post:
- Firms are becoming more receptive to legal tech
- Newer lawyers within the firm are receptive to legal tech but adoption and training can be a problem
- Adoption and training are crucial for success
- Continual training and technology champions are necessary to ensure the system is being used on a regular basis
One of the main issues is that newer lawyers within the firm may be receptive to legal tech, but may struggle with adoption and training. They may be familiar with the traditional way of working and may find it difficult to change their habits. Additionally, when a deal or case becomes stressful, it can be easy for them to fall back on the familiar and rely on paper documents and traditional processes.
Watch the full interview, The Importance of Adoption and Training in Legal Tech
This highlights the importance of adoption and training for the successful implementation of legal technology. Without proper adoption and training, the technology may not be used to its full potential and may not have the desired impact on the firm.
How to overcome legaltech adoption issues in legal departments
To overcome this, firms should focus on continual training and the appointment of technology champions within the firm. These individuals will be responsible for ensuring the technology is being used on a regular basis and providing support and training to their colleagues.
In conclusion, while the adoption of legal technology within law firms is becoming more common, the success of the technology is dependent on the adoption and training of the technology. Firms should focus on continual training and the appointment of technology champions to ensure the technology is being used to its full potential.
Feb 22, 2022
5 min read
Cloud-Based Tech Helped Many Industries. It’s Legal’s Turn
Cloud-based technology has made an impact and, in many ways, revolutionized how people share both personal and professional information. Think of platforms like Slack, Okta, or Box that allow users to send and receive files within secure password-protected environments.
Similarly, platforms like Facebook or LinkedIn have made it very easy for any individual with an account to share updates with friends or followers. Plus, with one direct message to a specific point of contact, you can pass along important files relevant to the conversation.
Modern technology has made connectivity easier than ever before. Yet in some industries, such as the legal professional community, innovation has not been so openly embraced. The question is: why are so many law firms still relying on clunky old software or, even worse, binders to store, manage and share important documents?
Some law firms worry about security and cybersecurity
Some of the reluctance by law firms to embrace cloud-based entity management solutions is the fear of being hacked. To be honest, those concerns are not without some merit. In a recent survey of 450 UK-based companies, two thirds of respondents admitted they were the victims of a cyber attack in the first 18 months of the COVID-19 pandemic.
However, cyber hacking isn’t exclusive to cloud-based servers. Large organizations with on-premise servers are still the victims of cyber attacks. While on-prem and cloud-based servers are both targets for malicious acts, cloud services like Google, AWS and others have thousands of PHd-level security teams working to keep those servers as secure as possible. Most law firms are limited to a small team of cybersecurity experts, making resource allocation at law firms a very real challenge to protect those on-prem servers from potential hacking.
Additionally, physical binders stored in the office itself are susceptible to fire, theft, unintentional misplacement, and other causes of loss or damage. Any of these misfortunes, accidental or otherwise, could compromise the security of those files and potentially risk exposing secure client information.
Finally, cloud-based security is more vital than ever as coronavirus forces more firms to embrace remote work as an acceptable norm. Cloud-based entity management platforms allow colleagues and clients to share confidential information without the risk of exposure.
Why law firms should embrace cloud-based solutions
Aging technology has made on-premise servers more vulnerable to cyber attacks. Cloud-based solutions use more sophisticated technology that includes additional layers of security to protect your clients’ rights to privacy. Nevertheless, we can acknowledge that there are no foolproof solutions when it comes to security, so let’s focus on value. The irrefutable fact is this: firms that use cloud-based entity management platforms can improve their bottom line, streamline their operations and create economies of scale to facilitate faster growth.
Cloud-based servers are cost-efficient
On-premise servers are expensive to maintain and, as previously noted, most law firms only have a limited number of professionals who can keep those servers secure. Not only are you paying for the server hardware, but you have to factor in salaries, maintenance, and other capital costs to keep them functional.
By migrating your files into the cloud, you can scale down or, if you choose, eliminate those on-prem servers from your office. All of those operational costs to maintain the servers can be reinvested back into the business in favour of growth-based strategies.
Cloud-based technology makes it easy to access all relevant documents
The day to day tasks for law clerks, paralegals and other professionals are often repetitive and time consuming. This is all the more challenging when clerks are required to manually input data or other relevant information into minute books and other documentation from both online and offline sources.
Using cloud-based solutions, you can make this entire process more efficient. All minute books, contracts, and noteworthy records are stored in one secure and convenient cloud-based database. Any clerk with access to the platform can go into the account and pull all relevant files to a particular case within moments. This is a highly efficient way to make a clerk’s time more productive so that they too can get back more time to contribute to the growth of the firm.
Lower costs and more efficient operations create economies of scale
This is the key reason why you should embrace forward-thinking solutions. Lower fixed and operational costs mean you’re spending less money to maintain your business. More efficient productivity from clerks and other professionals on your team make your firm more structured, streamlined, and well run.
Add all of those benefits up and it amounts to the economies of scale that enable any law firm to set the foundation for high growth results. You can devote more time (and billable hours) towards providing true value to your clients, and spend less time on the day to day tasks of storing, securing, sharing, and updating minute books. In the end, that’s your ROI to make an investment in cloud-based solutions worthwhile.
Ready to make your firm more productive and more efficient? Join the MinuteBox revolution so that you can create an environment that is guaranteed to create the optimal conditions to scale the growth of your business.