Buying a tax or financial services firm in Florida

Most of these firms prepare individual and small business tax returns, often with bookkeeping, payroll, notary work or help with IRS notices on the side. Some also offer financial planning, insurance or investments.

Tax clients pay once a year, per return, usually priced by the forms involved. So revenue is lumpy: most of it arrives between late January and mid-April, with a smaller bump before the fall extension deadline. Bookkeeping and payroll clients pay monthly and keep cash coming the rest of the year.

The real asset is the client list and the habit behind it. People tend to go back to whoever did last year's taxes, so a firm's value depends on how many clients stay after the owner changes. Teams are small: the owner (often an enrolled agent, CPA or longtime preparer), a few seasonal preparers, and someone at the front desk who books appointments and collects documents.

• A high share of last year's clients coming back, and records that show it.
• A mix of individual and business clients. Business returns and monthly bookkeeping are usually worth more and last longer.
• Preparers besides the owner whom clients trust and who plan to stay.
• Credentials that fit the work, such as enrolled agents or CPAs for clients who need representation before the IRS.
• A clean record with the IRS: no preparer penalties and few rejected e-filed returns.
• Secure, modern systems: a client portal, multi-factor logins and a written security plan.
• Prices that have kept up with the work.

Florida has no state license for tax preparers. Paid preparers need an IRS preparer tax identification number. E-filing takes an electronic filing identification number (EFIN), which can't be sold or transferred. You apply for your own, with proof of the sale, between 45 days before and 30 days after closing, and approval can take 45 days (IRS Publication 3112). Enrolled agents, CPAs and attorneys can represent clients before the IRS on any matter. Other preparers have limited rights or none.

A firm that calls itself a CPA firm, or does audits and other attest work (where a CPA vouches for financial statements), must be licensed by the Board of Accountancy and at least 51 percent owned by CPAs (sections 473.3101 and 473.309, Florida Statutes). A non-CPA can own a tax and bookkeeping firm that does neither.

Investment advice requires registration with the Office of Financial Regulation or the SEC (section 517.12). Selling insurance takes a Department of Financial Services license. The FTC Safeguards Rule requires tax preparers to keep a written information security program. Federal rules limit sharing client tax data but allow for selling a practice, including a buyer's review under a written confidentiality agreement (Treasury Regulation 301.7216-2). Let your attorney plan the handover.

• Retention. Returns filed each year, and how many clients came back after any past change of preparer.
• Cash flow. Revenue by month, and whether the business covers its costs from May to December.
• Transition terms. Many deals tie part of the price to how many clients come back, with the seller working through a filing season. Ask your attorney and lender how that fits your financing.
• Compliance. Preparers face extra due diligence rules and penalties on returns that claim the earned income credit and some other credits. Ask about IRS visits, letters or penalties.
• Data security. Any breaches or stolen client data, cyber insurance, and whether the security plan is real.
• Software. Whether the tax software licenses and client data can move to you, and what any bank products tied to refunds depend on.
• Seasonal staff. Whether trained preparers will return next January.

• How many returns did you do in each of the last few years, and how many clients came back?
• Which clients deal with you personally, and how would you introduce them to me?
• Would you stay on through one or two filing seasons?
• What software do you use, and can the licenses and client data come over to me?
• Have you ever had an IRS penalty, compliance visit or data breach?
• How much of your revenue comes from bookkeeping and payroll outside tax season?
• When did you last raise prices, and how did clients react?