Starting an accounting firm offers an opportunity to map your professional course and enjoy the flexibility and control of being your own boss. Moreover, accounting is one of the most lucrative small businesses a person can start.
The process of starting your own business comes with plenty of research and work involved. As a result, many factors must be considered when determining how to start your accounting firm.
1. Choosing a Business Structure.
The business entity type you choose has legal and tax implications for an accounting business. That said, if you are planning to be the only one employed in your firm, you can choose to form a Limited Liability Company (LLC), Professional Limited Liability Company (PLLC), or Professional Corporation (PC). On the other hand, if you plan to start an accounting business with a partner or partners, consider the Limited Liability Partnership (LLP) structure.
2. Looking at Business Insurance.
Forming an official business entity limits an owner’s liability related to business debt and lawsuits. Still, it will not protect personal assets if actions are brought against you as a business owner for your own acts of wrongdoing or negligence.
Luckily, nowadays you can purchase your accountant insurance online for additional protection. This can be tailored to your needs and give you peace of mind so that you can focus on growing your firm.
3. Considering Business Licenses and Permits.
Depending on the services you are planning to offer, you might need to take the CPA exam so you can obtain a CPA certificate and license to practice.
However, you can also have an accounting firm without a CPA certificate. Still, you will not be allowed to give audits and assurance services. In addition, states have their own set of education and experience requirements before allowing someone to provide services as a CPA. So, make sure to review your state’s specific rules before starting.
4. Developing a Business Plan.
Starting an accounting firm is like starting any small business, so developing a business plan is crucial. Start by asking yourself why are you doing this and what is your goal?
Knowing why you are starting a firm can help you not just develop a sound business plan but also determine how your company will be structured, define your target market, and make a financial projection.
5. Making a Budget Framework.
Developing, monitoring, and managing a budget is key to business success. Having a budget framework before you start establishing an accounting firm will help you allocate resources where they are needed.
To start, consider that the requirements and costs to create a business entity vary from state to state. Then, think of operational expenses, planned sales volumes, revenues, assets, liabilities, and cash flows. It may sound challenging at first glance, but it is vital to calculate and estimate what you are likely to earn and spend in the planned budget period.
6. Calculating the Price for Your Services.
Pricing your accounting services should not be random. It should be intentional and strategic. You should at least consider a few factors related to your potential clients – the company’s size, the scope of the work, and the area in which you are located.
In addition, keep in mind factors such as the value of your services to the target market, maximizing the profit margin, and being competitive. To get you started, take a look and evaluate some common pricing structures from other accounting firms.
7. Obtaining Employer Identification Number.
When opting for an accounting business, or any company for that matter, you need to obtain an Employer Identification Number (EIN). This number, which is also known as the Federal Tax ID Number, will identify your business entity. Having one is a must since you will use it for tax filing and reporting purposes and opening a business bank account.
8. Opening a Business Bank Account.
Keeping personal and business finances separate is important, but as an accounting professional, you know this already. After you register your firm with the state and have obtained EIN, you basically have all the necessary documents to open a business bank account.
The Bottom Line
Starting an accounting firm is just as challenging as starting any other business. However, after going through all the must-be-done aspects, there is one crucial thing that you need to keep your focus on – finding new clients.
As clients are the center of your business, consider advertising across many different mediums, take advantage of social media, beat competitors’ prices, find fresh ways to save clients’ money, and be present in your community.