Trust, but verify
I can’t tell you the number of times that a client has brought me an executed agreement and don’t know who they actually got into bed with. Knowing exactly who you are executing a contract with may seem like a no-brainer, but you would be surprised. The party you sign a contract with may really be a shell company and the real party in interest is actually a shareholder. Good luck finding out who they are. In the private equity realm, that happens a lot. In other situations, you may be given a trade name of a company but may not know who the actual owner would be. That’s why it is critical that you verify the counterparty and make sure the person signing on their behalf is approved to do so. Below are some good ways to do this:
- Require a W-9 from the other side
- Look up the company’s name on the State’s Department of Corporations website
- Do a search online
- Look up the company’s name in the local prothonotary or county court website
- Ask for a signed company resolution approving the authority of the person signing the agreement
- Ask your professional business advisors
Knowing who you sign a contract with will be important not if, but when it comes time to enforce your rights. As Ronald Reagan famously said, “Trust, but verify”.
A few things that may be of interest:
- Economic Review: August 2022 – Silvercrest (silvercrestgroup.com) (thanks to Sean O’Dowd for sharing)
- Raising the Curtain: The Next Act for Alternative Investments (eisneramper.com) (9/21; 2-330pm, Virtual; 9/22 2-7pm, In-Person)
- What does the Inflation Reduction Act Mean for Taxes (eisneramper.com)
- Business in a Disruptive Era: A Town Hall Discussion – Stambaugh Ness (9/8; Virtual, 2-3pm)
Helpful Resource Pages
- Knowledge Center (eisneramper.com)
- Trout CPA Blog | Tax & Business-Related Topics
- Resources – Stambaugh Ness
- News & Analysis | Littler Mendelson P.C.
- Insights, Analysis & Perspectives for Your Business | RKL LLP (rklcpa.com)
- NFIB Research: Data and Trends Affecting Small Business Owners | NFIB
- The Tax Warrior Chronicles (taxwarriors.com)
As always, please don’t hesitate to email myself (firstname.lastname@example.org), Andy Miller (email@example.com), Christian Miller (firstname.lastname@example.org), Erik Spurlin (email@example.com) or anyone in our office with questions or comments.