What to do if you had bad book keeping?

[duckxtales]

My name is Pat from NYC.

Back in 2000 when I was still in high school, me and my friends got our first company incorporated and is still running up to now. Since the beginning I haven’t kept good records of my transactions and receipts, Basically bad accounting practices, but I started to keep everything in order in October of 2002. Right now my tax preparer suggests me to close this company down and open up a new one so I won’t get audited that easily and have a fresh new start. The thing here is that the company I have now has good credit references with a couple of companies. And if I start a new company taking over the existing one, I would have to reestablish accounts with them along with the trouble in opening new accounts elsewhere that require at least 6 month experience with other existing companies. What do you suggest me to do? Either close this company down and open up a new one to avoid getting audited or stay with my existing one.

I know a lot of people tell me getting audited is a very slim chance. And one other thing I must mention, I started the company with 20k during 2000-2002, I rented a storefront which failed and was at a lost during that time. But, during 2002-2003 I just started to make a profit and its gradually going up. Basically, I failed during the first 2 years and really got things together after that.

Any help is appreciated.

Thanks,
Pat

[Mardi_Gras]

If you think your accountant is giving you bad advice, or you think a second opinion is warranted, go see another accountant - not a bunch of webmasters ;)

Make sure whoever you talk to understands that you are trying to balance the risk of an audit against the gain of perhaps easier access to credit. You need to learn the pros and cons of what you are trying to do - but I don't think this is the place to learn it :)

[trillianjedi]

Honesty is the best policy. Anyone worth his salt doing an audit will see a paper trail back to the old company.

I would be straight with anyone that asks - explain the position and fill in as many gaps as you can from memory.

Unless you are advised by your accountant that you could get in serious trouble (which I sincerely doubt as the majority of small company's which are not doing well do not keep accurate records).

TJ

[Web Footed Newbie]

First, welcome to WebmasterWorld, duckxtales.

There is absolutely no question here - get a new accountant! That is extremely bad advice, because I am an accountant.

Audits can go back up to 3 years, but it is a very slim chance you will get audited. You did file tax returns during those years, didn't you?

If you did, don't worry - that is, if you reported any business income. If you didn't, you can file an amended return with the receipts that you can get your hands on.

HONESTY is the best policy, and your accountant sounds like he is not. Remove all ties to him, but do it politely. He could actually report you to the IRS if you don't use him for his services, he sounds like the type. Or get rid of him in a few months....

Now, why did you post here? Do you need webmaster advice? Make a decision about your business, quit asking everyone's advice, and go turn a profit.
WFN:)

[duckxtales]

Yea I did file income taxes each year, but I filed it as a loss though. I started with a storefront and I lost alot of money from that and just recently this year, I got into another venture and now the company is starting to make a profit. From 2000-2002 I started with 20k and lost about 13k. Then I had 7k left, and from 2002-Present I just made it over that 20k mark which is profit. So, do you think I have to worry?

[Lilliabeth]

I am no accountant, but it seems to me that if your company is showing a profit at this stage, you salary is too low.

Somebody with more accounting knowledge: what do you think?
What do you think, Web_Footed?