Starting a CPA Firm: 7 Key Questions Answered

Are you thinking of starting your own accounting firm? Leaving behind the safety net of working for an established, reputable accounting firm can be stressful, but when you create a successful business, the benefits will far outweigh your risks.
If you believe the time is right to start an accounting practice, you must first carefully plan your approach.

What to Consider When Starting Your Own CPA Firm

There are many questions involved with starting your own CPA firm. Like any start-up, getting off the ground is no simple task. With the seven key questions below, we hope to give you a head start on your planning.

How much does it cost to start a CPA firm?

The cost of starting a CPA firm varies based on your accounting services offered, location, choice of office space, and personal assets. If you start in a home office, for example, your initial start-up costs (1) may include office supplies, licensing fees, accounting software, and business insurance, costing you $1,000 to $3,000. You may need to add office rental, furniture, and utilities to use commercial space, driving the costs over $10,000.
It is crucial to create a detailed business plan that accurately reflects your specific start-up costs and potential cash flow. This plan will help you assess your new business’ ability to thrive throughout the potential challenges of the start-up period.

What type of capital do I need to start a CPA firm? How will I fund the start-up costs of my firm?

Once you have a handle on your anticipated start-up costs, you must determine how you will secure the financial resources (2) you need to build your business. You should also cover at least the first six months of operating costs. Will you use your personal money, seek investors, or take out a loan to cover your seed capital and working capital?
Things to consider with the different funding options:

  • Self-funding your business by tapping into your personal bank account allows you to retain full control over your business, but it can jeopardize your personal finances.
  • Investors or venture capitalists often request equity in the company instead of repayment.
  • If you apply for a small business loan, you must have a solid business plan and up to five years of financial projections in place.
How profitable is starting a CPA firm?

Nearly every U.S. business will need the services of a certified public accountant at some point. With an estimated 88,652 accounting services businesses (3) in the United States in 2023, ensuring your practice stands out from the others takes hard work and a thorough understanding of what it takes to run a CPA business.
Similar to understanding the start-up costs for your CPA practice, projecting your revenue streams is equally important for any successful startup. Your profit depends on a variety of factors, including the services you offer, competition, size of client base, pricing, and ability to manage your expenses effectively.
Thomson Reuters (4) reports the average CPA firm profitability, as measured by income per partner (IPP), was $521,000 in 2020. The average IPP across smaller firms with less than $2 million in profits was $258K.
You may earn a different amount in your first year or any other year of business, but the information can serve as a benchmark for understanding the potential profitability of running an accounting business. It can also help you set realistic financial goals for your new accounting firm.

What types of insurance can help protect myself and my business from potential liabilities?

Business insurance policies are designed to help protect yourself and your new business. For example, Professional Liability and Employment Practices Liability insurance can help protect your practice and your personal assets against lawsuits from clients and employees.

Want to learn more about other insurance coverages? Download our eBook about starting a firm to find out how AICPA Member Insurance Programs could help protect you and your practice.

Should I structure my firm as a sole proprietorship, partnership, LLC, or corporation? What are the legal and tax implications of each?

Understanding the different business structures is important when choosing one for your practice. There are four primary types of business ownership (5), and each type comes with distinct tax and legal implications.

  • Sole Proprietorship. You are designated the firm’s sole owner when your business is structured as a sole proprietorship. You are personally responsible for all debts and liabilities, and your firm’s income and expenses are reported on your personal tax returns.
  • Partnership. When you have one or more partners, all share in the business’ responsibilities and earnings. For tax purposes, the income tax is passed down to the partners, and each partner is taxed on their share of the partnership’s profits or losses.
  • Corporation. A corporation is a legal entity distinct and separate from its owners and typically comes with governance formalities and structure.
  • Limited Liability Company (LLC). An LLC protects owners from personal responsibility involving liabilities and debts. Like partnerships, LLC income and loss are reported on each member’s personal tax returns.
How will I attract and retain clients? What marketing strategies should I employ?

Attracting new clients to your business is one of the most important aspects of starting your firm. The good thing about being the firm owner is you get to decide the target market for your potential clients. Your marketing plan should include your list of services, such as auditing, tax preparation, tax returns, and your marketing strategy. Your strategy will then define how you will reach your prospective clients.
Here are some marketing strategies to consider:

  • Face-to-face networking. Nothing draws in business better than networking, shaking hands, and building relationships with other small business owners and community members.
  • Word-of-mouth. Tell your family, friends, and former coworkers that you are starting a CPA business and ask them to help spread the word. Consider giving gifts, like a Starbucks gift card, to show your appreciation for their referrals.
  • Online presence. Put yourself on social media, set up a website with testimonials and a list of services, be a guest on a podcast, and create your Google Business Profile. 
  • Volunteer your services. Support local non-profits by helping with QuickBooks, being a guest speaker at the local Chamber of Commerce or organizing a free bookkeeping workshop. Free consultations give you exposure as the local public accountant expert.

Download our eBook on starting your own firm to see more marketing tactics that can help increase your client base.
There is no one-size-fits-all approach, so combining multiple strategies will give you optimal exposure. Once you attract your clients, the best way to retain them is to exceed their expectations and deliver “knock-your-socks-off” client services.

What are the benefits of owning a CPA firm?

Aside from the obvious benefits of being your own boss, when you join the ranks of entrepreneurs who branch out and become business owners, you will realize there are numerous benefits, including:

  • Financial independence. Working full-time for yourself can be much more financially rewarding than collecting an employee paycheck. Your earning potential is directly tied to the success of your practice. Plus, there are several tax benefits the IRS offers to business owners that aren’t available to individuals.
  • Legacy. Owning your own business allows you to pass it down to the next generation, offering them financial stability for years.
  • Personal satisfaction. Doing what you love will make you happier and more fulfilled. Although you will still face stressful situations, your sense of accomplishment will surely offset the bad days.
  • Work-life balance. The number of hours you work, the number of clients you take on, the types of services you offer — all of these are under your control. The flexibility of your schedule is completely up to you.

Ready to start your own CPA practice?

You probably have more questions you need answered before you launch your CPA practice. Read our guide to help you through the many considerations involved, including a self-assessment to determine your motivation, business plan tips, staffing considerations, and more.


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