CPA Incorporation: How to Incorporate a Business as a CPA

You love working as an accountant. Now, you want to showcase your skills to the community. How do you do this? You have a better chance of attracting business by contacting an attorney about CPA incorporation.

I can help you with incorporation, and assist you with establishing a CPA practice in your community.

You can reach me at any time about CPA incorporation at sam@mollaeilaw.com. I will be happy to show you the steps of incorporation and help you with all that nagging, detailed paperwork.

By emailing me, you can realize your dream of setting up an accounting practice that is both successful and well-known.

 

How Do You Begin the CPA Incorporation Process?

To begin CPA incorporation, you will need to obtain legal services first. That way, you can make sure that the incorporation is done properly. Again, just email me at sam@mollaeilaw.com about how to go about the process.

The following details will give you further information before you begin.

Before you initiate CPA incorporation, you need to familiarize yourself with entity structures. For example, some CPA firms set up a partnership instead of a corporation.

A partnership, as the name suggests, allows accountants to work and collaborate together. To form this type of entity, you will need me to set up a partnership agreement.

A partnership agreement must be created to confirm each partner’s ownership interests. While partners enjoy equal status in a traditional partnership, they may also share a percentage of the business that is not 50-50.

While a partnership is less expensive to form or run, a corporation adds to the status of an accounting practice.

If you want to learn more about the differences between a partnership and CPA corporation, email me for a consultation at sam@mollaeilaw.com. 

A CPA corporation stands alone and is owned by shareholders. It is created through paperwork known as articles of incorporation. These articles are filed with the Secretary of State’s office.

A traditional corporation is known as a C corporation while an alternative form is called an S corporation. The most widely used form of a corporation for a CPA practice is a professional corporation or PC. A PC may choose to be defined as an S corporation for tax purposes. 

 

Establishing the Bylaws

You need to establish bylaws for your CPA practice before you can incorporate it. The firm’s bylaws should feature guidelines and rules needed in addressing certain issues that may come up from time to time. These issues may include the following:

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• The responsibilities assumed by the board of the directors
• Stockholder qualifications
• Itineraries of stockholder meetings

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Is a PC the Best Way to Establish CPA Incorporation?

While a PC is more widely know for a CPA incorporation, it does not mean that it is the best way to establish your practice. When you contact me at sam@mollaeilaw.com, I will assess your practice’s specific goals to see which corporate entity works the best for you. 

The PC designation is only given to professional firms run and managed by lawyers or CPAs. If you wish to create a PC but want to drop the PC designation, you will need to file a doing business as (dba) or fictitious name to prevent any confusion about the company’s name.

Again, you should work with an attorney to make sure you proceed and comply with your state’s mandates.

No name restrictions exist for naming a CPA firm, as long as they are not misleading. No person or accounting firm can practice accounting under a name other than the name where the firm holds a legal permit. 

 

Reviewing Your CPA Incorporation Checklist in California

While I practice law in California and the following checklist covers CPA incorporation in California, you can also use it as a basic guide if you plan to incorporate it elsewhere. Simply send me an email at sam@mollaeilaw.com, as I can help you incorporate in any state.

 

CPA Incorporation Checklist

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1. The first thing you need to do it to pay the licensure fees. You need to complete an application for licensure and pay the fees before you incorporate it.

2. Next, you need to determine a corporate name. Make sure it has not been taken by checking the names on the Secretary of State’s listing or recorded names.

3. The Articles of Incorporation should be drafted and submitted for approval to the Secretary of State (SOS). The name on the Articles of Incorporation must be the same as the name on the application for licensure.

This name must appear on all documentation that is submitted.

In California, filing the Articles of Incorporation is detailed on the SOS website. A business or CPA practice that incorporates in California is subject to payment of a state corporation franchise tax.

You can learn more about this tax by visiting the Franchise Tax Board’s website.

4. A copy of the corporation’s bylaws must be produced, which contains a passage that details the ownership and transfer of shares of stock. 

5. Shareholders, directors, and officers must hold the required licenses to practice public accountancy. A listing of shareholders, directors, and officers must be added to the application for licensure for the accountancy practice.

The practice that opts for CPA incorporation must show that it will be managed by a CPA (certified public accountant) or a PA (public accountant).

6. Out-of-state CPAs or PAs who wish to practice in California should create and apply for licensure as a CPA and meet the proper legal requirements. I can help you if this situation applies to you. You can email me anytime at sam@mollaeilaw.com. 

7. An accountancy corporation declaration statement must be signed by an officer who is a licensee who has a valid license to practice public accounting. A firm with non-licensee owners must complete and submit a non-licensee owner declaration.

I can help you with forming a checklist for CPA incorporation in California or any state. You just need to contact me by email at sam@mollaeilaw.com to get things initiated.

I can also answer your questions about the formation of a traditional C corporation, professional corporation, or S corporation. 

Each practice is different and has different operational and tax needs. That is why forming a corporate entity must be done correctly and carefully.

Usually, most small accounting practices choose to set themselves up with an S corporation status.

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How an S Corporation is Created

For a CPA business to qualify as an S corporation, it needs to be eligible. Remember – corporations cannot hold and S corporation status if they hold more than one class of stock.

They also cannot have more than 100 shareholders. Finally, the practice’s profits and losses must be allocated in proportion to each shareholder’s interest in the company.

An S corporation is overseen by a Board of Directors that have been elected by the stockholders. Daily operations are managed by officers that have been appointed by the directors.

If you form a limited liability company for your CPA practice, you will have more flexibility with respect to management.

An S corporation can bypass the double taxation imposed on a traditional C corporation. That is why this formation is often chosen by CPAs.

The S corporation can report its entire income on the personal tax returns of shareholders. Otherwise, the earnings are reported by the corporation and again by the stockholders, on their dividends.

 

An LLC Formation Offers Certain Advantages Too

An LLC can be managed by its members or by appointed managers. The style of management used is set out in the company’s operating agreement, which details the duties and responsibilities of the named managers.

 

What To Do Next

You can see that a CPA incorporation can get involved. That is why I am here to help. Simply email me about setting up a consultation at sam@mollaeilaw.com today. Arrange an appointment so we can meet face-to-face and work out a feasible schedule for establishing your business entity.