Start an accounting firm by following these 9 steps:
You have found the perfect business idea, and now you are ready to take the next step. There is more to starting a business than just registering it with the state. We have put together this simple step guide to starting your accounting firm. These steps will ensure that your new business is well planned out, registered properly and legally compliant.
STEP 1: Plan your Business
A clear plan is essential for success as an entrepreneur. It will help you map out the specifics of your business and discover some unknowns. A few important topics to consider are:
- What are the startup and ongoing costs?
- Who is your target market?
- How long it will take you to break even?
- What will you name your business?
Luckily we have done a lot of this research for you.
What are the costs involved in opening an accounting firm?
An accounting service requires an office, computers, accounting software, high-speed Internet, desks, filing cabinets, printers, insurance, and money for advertising. It is also necessary to become a certified public accountant (CPA). CPA exam fees typically cost around $1,000.
What are the ongoing expenses for an accounting firm?
An accounting service must pay monthly office rent, utilities, high-speed Internet, employee salaries, marketing costs, insurance, computer/software upgrades and general office expenses. The cost of monthly office rent for an accounting service depends on the size of the space as well as the location. In general, you can expect to pay between $600 and $1,500 each month to rent an office. It is also possible to operate out of your home or another property you own. Budget at least $150 to $200 per month for utilities including high-speed Internet.
A receptionist will require a salary of $25,000 to $35,000. A marketing professional will demand an annual salary in the range of $35,000 to $60,000 or more. If you do not want to handle the accounting work on your own, it will be necessary to hire one or several accountants. These professionals typically command a salary of $40,000 to $80,000 per year.
Budget in at least a couple hundred dollars per month for marketing. You will eventually have to replace and upgrade computer hardware and software. It is prudent to put $100 to $200 aside each month for these inevitable expenses. This way, you will have money available for replacements/upgrades when the time comes to implement them. Budget between $100 and $200 each month for office sundries like coffee, pizza parties, bottled water, staples, paper, ink toner etc.
Who is the target market?
The ideal client is a large business. Other ideal clients include wealthy individuals and business owners with myriad sources of income.
How does an accounting firm make money?
An accounting service makes money by charging clients fees. Some work on an hourly basis while others accept a flat rate for project work. Other accounting services are paid an annual sum of money that covers the entire year's worth of accounting work.
How much can you charge customers?
The amount of money charged to clients differs on the size of their enterprise, the scope of the work, the region in which you are located and a number of other factors. If you secure a high-profile business with substantial revenue, you can likely charge $125 to $350 per hour. If you are handling a single project such as year-of-end taxes for an individual, you can likely charge a couple hundred dollars to a couple thousand dollars depending on the complexity of the project.
How much profit can an accounting firm make?
If you are a one-man operation, you will likely make between $30,000 and $75,000 in the first year or two. Continue to grow your business and your profits will eventually reach six figures. If you secure a steady roster of clients and expand throughout the region, it is possible to make millions of dollars.
How can you make your business more profitable?
Ask clients to recommend your services to colleagues and friends. Jump at the opportunity to tackle side projects such as a wealthy client's personal taxes. It is also possible to make extra money by teaching accounting classes and training others on accounting software programs.
What will you name your business?
Choosing the right name is very important. We recommend checking if the business name you choose is available as a web domain and securing it early so no one else can take it.
After registering a domain name, consider setting up a professional email account (@yourcompany.com). Google's G Suite offers a business email service that comes with other useful tools, including word processing, spreadsheets, and more. Try it for free
STEP 2: Form a legal entity
Establishing a legal business entity such as an LLC prevents you from being personally liable if your accounting firm is sued. There are many business structures to choose from including: Corporations, LLC's, and DBA's.
You should also consider using a registered agent service to help protect your privacy and stay compliant.
For most small businesses forming an LLC is a great option, but if you still want to weigh all your options check our our article, What Structure Should I Choose for My Business?
STEP 3: Register for taxes
You will need to register for a variety of state and federal taxes before you can open for business.
In order to register for taxes you will need to apply for an EIN. It's really easy and free!
You can acquire your EIN for free through the IRS website, via fax, or by mail. If you would like to learn more about EINs and how they can benefit your LLC, read our article, What is an EIN?.
STEP 4: Open a business bank account & credit card
Using dedicated business banking and credit accounts is essential for personal asset protection.
When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to as piercing your corporate veil.
Open a business bank account
- This separates your personal assets from your company's assets, which is necessary for personal asset protection.
- It also makes accounting and tax filing easier.
Get a business credit card
- This helps you separate personal and business expenses by putting your business' expenses all in one place.
- It also builds your company's credit history, which can be useful to raise money and investment later on.
STEP 5: Set up business accounting
Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.
STEP 6: Obtain necessary permits and licenses
Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.
State & Local Business Licensing Requirements
In most states, it is necessary to obtain an accounting license. Certain state permits and licenses may be needed to operate an accounting business. Learn more about licensing requirements in your state by visiting SBA’s reference to state licenses and permits.
Most businesses are required to collect sales tax on the goods or services they provide. To learn more about how sales tax will affect your business, read our article, Sales Tax for Small Businesses.
For more information about local licenses and permits:
- Check with your town, city or county clerk’s office
- Get assistance from one of the local associations listed in US Small Business Associations directory of local business resources.
Certificate of Occupancy
An accounting business is generally run out of an office. Businesses operating out of a physical location typically require a Certificate of Occupancy (CO). A CO confirms that all building codes, zoning laws and government regulations have been met.
- If you plan to lease a location:
- It is generally the landlord’s responsibility to obtain a CO.
- Before leasing, confirm that your landlord has or can obtain a valid CO that is applicable to an accounting business.
- After a major renovation, a new CO often needs to be issued. If your place of business will be renovated before opening, it is recommended to include language in your lease agreement stating that lease payments will not commence until a valid CO is issued.
- If you plan to purchase or build a location:
- You will be responsible for obtaining a valid CO from a local government authority.
- Review all building codes and zoning requirements for your business’ location to ensure your accounting business will be in compliance and able to obtain a CO.
In order to provide accounting services, you may need to be certified (a Certified Public Accountant). This certification allows you to perform services that would otherwise be illegal to provide without certification.
Be sure to create a services contract. The contract should make it clear exactly which services you offer, how much you will charge, and what will happen in case of any contingencies--for example, if your client is audited, will you be responsible?
STEP 7: Get Business Insurance
Insurance is highly recommended for all business owners. If you hire employees, workers compensation insurance may be a legal requirement in your state.
STEP 8: Define your brand
Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors.
How to promote & market an accounting firm
The best way to promote an accounting business is by establishing relationships with local business owners and professionals. Attend networking events and conferences. Join the National Association of Tax Professionals (NATP) and/or the American Institute of Certified Public Accountants (AICPA) so you can learn as much as possible about the industry and stay up to date on trends. Advertise throughout the community with flyers, brochures, press releases, ads on radio stations, commercials on local TV, regional magazine ads, town newspaper ads, etc. Make sure your website looks professional and has an intuitive user experience design. All website content should be optimized for search engines (SEO), so locals find your accounting service when conducting online searches for accountants within the community.
Recommended: Get started with local advertising for your business with a $300 credit from Yelp.
How to keep customers coming back
Start out by obtaining a license to operate your business in your home state. This credential is necessary to attract and retain customers. Spread out your marketing budget across an array of mediums. Press the flesh at networking events. Seize every opportunity to introduce yourself to business owners, investors, and anyone who you suspect might need accounting services or have the authority to make decisions related to hiring accounting services. Be sure to ramp up your marketing efforts during tax season when accounting services are in high demand. Match or beat competitors' prices, develop strategies to reduce client expenses, and explain accounting details in layman's terms clients can understand.
STEP 9: Establish your Web Presence
A business website allows customers to learn more about your company and the products or services you offer. You can also use social media to attract new clients or customers.
Start An Accounting Firm In Your State
Select your state below for an in-depth guide on completing each of these steps in your home state.
Is this Business Right For You?
If you are good with numbers, computers, spreadsheets, and have a passion for business, an accounting service is right up your alley.
What happens during a typical day at an accounting firm?
The typical day for an accounting service business owner involves everything from searching for new clients to creating and modifying accounting spreadsheets, explaining financial information to clients, delegating duties to employees and handling marketing efforts.
What are some skills and experiences that will help you build a successful accounting firm?
It is important to differentiate your accounting service from competitors. Find a niche, master it, and the clients will trickle in. Furthermore, a mastering of financial concepts, tax laws, accounting principles and mathematics will help. It is also prudent to familiarize oneself with the nuances of accounting software programs such as QuickBooks, Xero, and Peachtree.
What is the growth potential for an accounting firm?
Accounting is a hot field. As long as businesses and complex finance/tax laws exist, accounting services will play an important role. Prove your worth as an accountant and you will gradually add clients to your roster. It is even possible to expand throughout your region, across the state and beyond. The optimal result is growing your accounting service to the point that it provides services for clients throughout the nation and even the world.
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Take the Next Step
Find a business mentor
One of the greatest resources an entrepreneur can have is quality mentorship. As you start planning your business, connect with a free business resource near you to get the help you need.
Having a support network in place to turn to during tough times is a major factor of success for new business owners.
Resources to Help Women in Business
There are many resources out there specifically for women entrepreneurs. We’ve gathered necessary and useful information to help you succeed both professionally and personally:
If you’re a woman looking for some guidance in entrepreneurship, check out this great new series Women in Business created by the women of our partner Startup Savant.
What are some insider tips for jump starting an accounting firm?
Recruiting new clients is the lifeblood of an accounting service business. Advertise across an array of mediums to make a name for your accounting service within the community. Master your selected accounting software program. Beat competitors' prices and find creative ways to save clients’ money.
How and when to build a team
You might not need much of a team right away. Once the phone starts ringing, you will benefit from having a receptionist on staff. A marketing professional and junior accountants will eventually be necessary as the business grows. Wait until you have at least a couple clients before adding a full-time employee to the team. You will likely be able to handle reception duties, marketing and the accounting workload in the initial months before bringing a salaried employee on board.