Here at MyCorp, we love talking about small business, as the sheer variety of small businesses available to start up is simply astounding. There is no, one, ubiquitous small business industry. Retailers, lawyers, restaurateurs, accountants – nearly every profession can be spun into a business!
With that in mind, we’re bringing you the ABCs of Small Business Industry as our latest post series on our blog. Over the next few months, we’ll be looking at the major industries that make up the small business world, taking a look at the different types of businesses, and helping people within these various industries start their own companies.
Without further ado, we present the first in what we hope will be an educational and enjoyable series – A is for Accounting.
What do you need to create your own accounting practice?
First, you need to be licensed. A Certified Public Accountant has to pass a Uniform CPA exam, and you can’t legally offer your services as an accountant without some sort of credentialing. Licensing and certification will also vary state-to-state, so make sure you research what your state requires of an accountant before you open up your practice. If all of your ducks are in a row, opening up your own firm is like opening any other small business. You need a DBA name, and you have to apply for all of your local/state business and operating licenses. You should also have some sort of professional liability insurance, just to protect yourself, and if you hire anyone or bring on a partner, you’ll need an Employer Identification Number (EIN).
Once all of that is taken care of you’ll have a sole-proprietorship, or a partnership if you have a partner. However, this type of business can leave you personally liable for any debt resulting from lawsuits, debt, or negligence and it’s a good idea to consider forming a separate business entity.
What sort of entity should an accountant form?
Any accountant looking to turn their firm into its own legal entity can choose from the same types of entity as any other business. However, the most popular entities by far are Professional Limited Liability Companies or Limited Liability Partnerships. A Professional LLC or LLP is effectively the same as any other LLC, but it’s reserved for regulated professions, like doctors or accountants. Profits are distributed amongst the partners, and the other members of the firm cannot be held accountable for the negligence of a partner. PLLCs and LLPs are actually really similar – the main difference is that a PLLC can usually be formed by only one person, while LLPs have to have at least two. Not every state recognizes PLLCs either, so if you are thinking about expanding, keep that in mind.
An accountant can also form Professional Corporations, but these are heavily regulated. In California, for example, would-be corporations have to apply for licensure from the California Board of Accountants, and have to have at least one shareholder with an active CPA license.
How healthy is the industry?
Luckily, accountants don’t have to worry too much about job prospects. The Bureau of Labor Statistics predicts a 13% growth rate for the industry between 2012 and 2022. But some areas are more suited for accountants than others. California and Texas are the best states for an accountant looking for work. According to ThinkAdvisor, Dallas, Houston, San Francisco, and Irvine are the top four cities for people working in finance.
Are you an accountant? Interested in starting your own firm? Not sure where to start? MyCorp can help! Just leave a comment below, or give us a call at 1 (877) 692-6772, and we’ll help you get your own practice up and running!