Buying an accounting practice in Florida

Small accounting practices do some mix of individual and business tax returns, monthly bookkeeping and payroll, financial statements for lenders, tax planning and help with IRS notices. CPA firms may also do audits and reviews, which only licensed firms can offer.

Money comes in on two schedules. Bookkeeping, payroll and advisory clients pay monthly, often automatically. Tax returns are billed once a year, mostly between January and April, with a second rush before the October extension deadline. A practice built mainly on individual returns earns most of its money in a few months and depends on clients coming back every year.

Clients are local businesses and households, and they tend to stay for years because switching accountants is a hassle. The usual team is the owner, one or two preparers or staff accountants, a bookkeeper and an office manager. The owner often reviews and signs every return, so the biggest question in a sale is how clients will feel about someone new signing theirs.

• Clients who come back year after year, with a healthy mix of individuals and businesses.
• Monthly work that brings in money outside tax season.
• Fees that have kept up with the work, ideally fixed fees in signed engagement letters rather than old hourly rates.
• Staff who prepare returns, so the owner reviews instead of doing everything.
• Current tax software, a secure client portal and organized workpapers.
• Mostly routine returns, without a big share of complex or high-risk ones.
• A seller willing to stay through at least one tax season and introduce you to clients.
• Fees collected up front or by card on file, so little time goes into chasing unpaid bills.

Anyone may run a bookkeeping or tax preparation business in Florida. People who aren't CPAs may prepare tax returns, and financial statements as long as they don't give an opinion on them (section 473.322 of the Florida Statutes). Only a licensed CPA firm may offer audits, reviews and other assurance work, or call itself a CPA firm (section 473.3101).

A CPA firm needs a firm license from the Florida Board of Accountancy at the Department of Business and Professional Regulation. Under section 473.309, CPAs licensed in any state must hold at least 51 percent of the ownership and voting rights, at least one owner must hold an active Florida license, and every owner who isn't a CPA must work in the firm as their main occupation. So if you aren't a CPA, you can own a minority share of a CPA firm you work in, but you can't control it.

Anyone paid to prepare federal returns needs a preparer tax identification number from the IRS. The firm's e-file number (EFIN) can't be transferred. You apply for your own, with proof of the sale, between 45 days before and 30 days after closing, and approval can take up to 45 days (IRS Publication 3112). Ask the Board of Accountancy about ownership questions.

• The client list with fees for the last three years, and how many clients came back each year.
• How the price is paid. Many practice sales tie part of the price to how many clients stay, so understand exactly how that's counted.
• Engagement letters, and how client files will move to you. Federal rules let a client list go with the sale of a tax practice, and let you review it beforehand under a written confidentiality agreement (Treasury Regulation 301.7216-2). Ask your attorney about the rest.
• Professional liability insurance, and any open client complaints, IRS penalties against preparers or Board of Accountancy cases.
• Data security. Client files hold Social Security numbers and bank details, and the IRS reminds preparers that federal law requires a written information security plan. Ask to see it.
• Seasonal staff: who the practice hires each tax season and whether they'll come back.
• The software and storage contracts, and whether they can move to you.

• How many clients have you lost or added in each of the last three years?
• How much of your revenue is monthly work, and how much is tax season?
• Who prepares returns now, and who reviews and signs them?
• Would you stay through the next tax season and introduce me to your clients?
• Are any clients in a dispute with the IRS or behind on their filings?
• When did you last raise your fees, and did anyone leave?
• Is anyone on staff a CPA or enrolled agent, and would they stay?