Regardless of whether you’re finance major recently out of school or have been working in an accounting firm or department for years, I’ll wager you’ve pondered working for yourself. There’s a great deal to consider while exploring how to start an accounting business.
Starting an accounting business offers an opportunity to chart your own professional course and appreciate the adaptability and control of independent work. Obviously, there’s a lot of research and work engaged with the cycle. You’ll want to be thorough and all around informed as you make choices while taking strides to start your accounting business.
Seven Steps to Start an Accounting Business
1. Choose a Business Name
This seems like an easy-windy choice to make, however a ton rides on your decision of a business name
. It’s what customers will associate with your brand, and it will be on each bit of marketing content and communications that you produce. Some business proprietors decide to remember their first and last name for their business name (for example, “Diana Torres, CPA”). Or, they choose to get somewhat more creative and pick a trade name (e.g., “Rainbow Accounting Services”). I prescribe doing a corporate name search to guarantee no different business is already utilizing the ideal name. Knowing this without a moment’s delay allows you to reconsider your name before you’ve burned through cash on enrolling the name and creating your marketing materials. A trademark search is also a smart move on the off chance that you hope to expand your business into different states at some point.
2. Choose a Business Entity Type and Register Your Accounting Business
The business structure has legal and tax implications for an accounting business. One-individual accounting businesses and small firms frequently decide to form either a LLC (Limited Liability Company), PLLC (Professional Limited Liability Company), or PC (Professional Corporation). On the off chance that starting an accounting business
with more than one proprietor, accountants regularly think about the LLP (Limited Liability Partnership) structure. All of these offer some level of liability security for the business proprietor because they are viewed as a separate legal content. Along these lines, not at all like operating an accounting business as a sole proprietorship or general partnership, the accounting firm proprietor’s personal assets aren’t typically in danger in case of lawsuits or financial hardships of the business. Nonetheless, note that business proprietors are personally answerable for their own acts of bad behavior or carelessness.
Business entities are state develops, so the prerequisites and expenses to create them vary from state to state. Also, realize that a few states will confine which sorts of business structures an accounting firm may be. For example, California doesn’t allow accountants to form a LLC. It’s important to survey your state’s particular principles. Ways to do that are by taking a gander at the appropriate state agency websites, (for example, the Secretary of State office) and talking with an attorney.
After you’ve made an informed choice about the legal element you want for your business. Apply to enlist as agent (a prerequisite for LLCs and corporations) and document your business registration paperwork with your state as you start your accounting business.
3. Apply for an Employer Identification Number
An Employer Identification Number (EIN), also called a Federal Tax ID Number, recognizes your business for tax documenting and reporting purposes. Businesses that have representatives or that operate as a corporation or partnership must obtain an EIN. Most banks will necessitate that a business has an EIN before they will start a business bank account for the company.
4. Get the Necessary Business Licenses and Permits
Certified Public Accountants must pass a CPA exam to qualify for a CPA certificate and permit to practice. Also, states have their own arrangement of education and experience prerequisites before they will allow somebody to offer types of assistance as a CPA. The State Board of Accountancy in your state can give details about the professional necessities.
State and local municipalities may also require different licenses and permits, as well. Potential outcomes incorporate the accompanying things and others:
- General business operation license
- Signage permit
- Home occupation permit (if operating a business from home)
5. Open a Business Bank Account
As an accounting professional, you know this already, however I believe it’s worth repeating the importance of keeping personal and business finances separate for both legal and tax purposes. For LLCs and corporations, separation of personal and business financial assets is needed to maintain the “corporate cloak” that shields business proprietors from the liabilities of the business. After a company is enlisted with the state and has obtained its EIN, it ought to have all the information needed to start a business bank account and credit accounts.
6. Protect Your Business with Insurance
Forming an official business entity (LLC, LLP, PLLC, PC) limits an owner’s liability related to business debt and lawsuits, but it will not protect personal assets if action is brought against the business owner as a result of that individual’s own actions. An insurance policy can provide additional protection and deliver peace of mind. A knowledgeable and reputable insurance agent who understands the needs of businesses in the financial services
Forming an official business entity (LLC, LLP, PLLC, PC) restricts a owner’s liability related to business obligation and lawsuits, yet it won’t ensure personal assets if action is brought against the business proprietor because of that individual’s own actions. An insurance strategy can give additional assurance and convey peace of psyche. A knowledgeable and reputable insurance agent who understands the requirements of businesses in the financial services.
7. Put Your Business Compliance Responsibilities on Your Calendar
After starting an accounting business, there are ongoing requirements to fulfill to stay in good standing with the state and local governments. For example, LLCs, PLLCs, and PCs in most states must file an annual report each year and show proof of a valid certification. An accounting business registered as a corporation will have more compliance obligations than an LLC. Besides annual reports, they must hold annual meetings, prepare meeting minutes, uphold bylaws, and follow other rules. The business compliance requirements for each entity type vary by state.
After starting an accounting business, there are progressing prerequisites to satisfy to stay on favorable terms with the state and local governments. For example, LLCs, PLLCs, and PCs in many states must record an annual report each year and show evidence of a valid certification. An accounting business enlisted as a corporation will have more compliance obligations than a LLC. Other than annual reports, they should hold annual gatherings, prepare meeting minutes, maintain bylaws, and adhere to different principles. The business compliance necessities for each element type vary by state.
Other compliance obligations that most accounting businesses must finish include:
- Renew business licenses and permits.
- Keep business and personal finances separate.
- Maintaining a registered agent in every state where the business is registered.
- Renew business insurance policies.
- Formally record major company changes via Articles of Amendment.
- Five Mistakes to Avoid When Starting an Accounting Business
A hasty choice may have negative legal and financial consequences for the company. Therefore, it’s important to get master guidance from an attorney and research all the advantages and disadvantages. Contending inside a packed field of accounting companies
requires more than simply existing. Your degree of service and expertise may be superior to others in your area, however you should discover ways to communicate that and raise awareness of your value. Discover opportunities to build relationships with different business leaders and network individuals. Inclusion in organizations, for example, local chambers of trade, Rotary Clubs, and other networking gatherings can assist you with establishing a name for yourself and assemble trust. As I referenced earlier, progressing compliance filings and different obligations must happen accurately and on an ideal opportunity to keep a business on favorable terms. At the point when business proprietors fail to pay attention to detail or drag their feet in submitting filings, they may face fines, penalties, and even suspension of their businesses. That’s a not exactly ideal situation! Try not to let it happen to you.