A Certified Public Accountant (CPA) is an accounting professional who has met rigorous education, work experience and exam requirements to obtain a CPA license from the state. CPAs who start their own firms often provide a variety of high-value financial services including tax preparation, financial statement audits, bookkeeping and consulting.
CPA firms are usually organized as sole proprietorships or partnerships in the states or territories in which they operate. It is usually against state rules for a CPA firm to be organized as a corporation.
Size and Services
CPA firms vary in size from single-member firms operating out of home offices, to multinational firms with thousands of employees. Smaller firms with one or two owners typically focus on a particular niche, providing a limited set of services (i.e. bookkeeping and taxes only or audits and compilations only) to individuals, or to companies in a handful of industries. The owner of a small CPA firm may choose to employ non-CPAs to help with providing these services or performing administrative tasks.
Like law firms, CPA firms generally charge for their services by the hour. However, some services, like tax return preparation, are often billed at a flat rate (e.g. $50 to file a form 1040- EZ). According to an article at CPA Trendlines, hourly rates for partners/owners at small CPA firms (those with less than $500,000 in annual revenue) range from $115 per hour to $154 per hour. A sole practitioner CPA working 40 hours per week for 48 weeks per year could expect to earn approximately $220,800 — $295,680 per year before expenses.
The primary costs incurred by a CPA firm are employee salaries and office space. The amount of these costs can vary greatly depending on where the firm is located and whether the owner chooses to employ administrative staff. Employing few or no staff will lead to lower costs, but will also result in more time spent on administrative tasks by the owner, and less time spent on billable client work.
Other significant costs may include marketing, memberships in local business groups, taxes and technology (e.g. one or more computers and secure data storage). Costs related directly to client work (e.g. travel) are typically reimbursed by the client.
To start your own CPA firm, you must obtain a CPA license in the state where you intend to operate. Requirements for obtaining a CPA license vary by state, but always require a mixture of education (150 credit hours of post-secondary education is now standard), work experience, and a passing score on the CPA exam.
Additionally, in order to run a successful practice, you must be comfortable marketing your services to prospective clients, interacting with clients, and working long hours during tax and audit season.
Geoff Hill began his writing career in 2000 as a contributor to his college newspaper, "The Maroon Tiger." Since then, he has authored a book on accounting and maintains an accounting blog. Hill is a Certified Public Accountant with a focus on companies in technology, entertainment and media. He holds a Bachelor of Arts in business administration from Morehouse College.