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Lawyer for Accountants, Accountancy
Corporations and Accounting Practices
Article #3 – Legal compliance checklist
for an accountancy corporation
This is Article #3 in my 9-part series on
the basic corporate, business and contract law issues for
accountancy corporations and accounting practices in
California. The articles in this series are:
In my last article, I ask the threshold
question,
Should
you incorporate your accounting practice?
In this Article #3, I give you a legal compliance
checklist for your accountancy corporation.
Incorporating an accounting practice can feel overwhelming. There are so
many unknowns to cause you anxiety. I write this checklist
to fill in the unknown. This checklist gives you a bird’s
eye view of legal compliance for your start-up accountancy
corporation.
Let's start at the beginning -
incorporation.
Form the Accountancy
Corporation. Your basic choices are a C corporation
or an S corporation (you may not use an LLC for an
accounting practice). The law is tricky for
accountancy corporations, so use an attorney who knows
accountancy corporation law to draft your corporate documents (articles,
bylaws, stock certificates, etc.). In particular, the
bylaws and stock certificates need special language and
legends. Further, the Accountancy Act restricts who
can be a shareholder, director or officer, and has complex
provisions for non-licensee shareholders.
Fictitious Names.
The Accountancy Act is as clear as mud when it comes to
fictitious names. A fictitious name is a dba
or some name other than the accountancy corporation’s legal
name, for example, the firm of Smith & Wang Inc. might want
to do business as “Abacus.” In brief, a firm may
only practice under the name for which the Board of
Accountancy has issued a permit to practice; the Board will
not issue a fictitious name to an accountancy corporation or
accountancy partnership. The name on the articles of incorporation must match the
name on the license application.
Register the
Accountancy Corporation. You must register the
corporation with the Board of Accountancy.
Shareholders /
Buy-Sell Agreement. If your practice has more
than one owner / accountant, seriously consider getting a
shareholders / buy-sell agreement to govern your
relationship with your partners. These agreements save you
a lot of money if partner relations go bad. A buy-sell
agreement resolves disputes between the partners, including
exit provisions if the partners can’t work together
anymore. I call this the partners’ economic divorce. For
more info, see Article #5 -
Shareholder
buy-sell
agreements for accountancy corporations. The
buy-sell agreement also will contain provisions required by
law for disqualified accountants (deceased accountants or
those who've lost their license).
Get a Federal
Employer Identification Number (EIN). You can call the IRS for your EIN or get it from the
IRS’ website. I'm sure you know how to do this.
Bank Accounts.
Once you have the articles of incorporation plus EIN, you
can open bank accounts.
Choose a Location.
First decide on a general location, then check local zoning
requirements to be sure you can operate an office
there. Visit your local planning / permits department for
this and other local requirements for your location.
Real Property Lease.
One of the most important contracts you’ll sign is the lease
for your offices. The lease will bind you for years to
come, and you’ll have to continue paying rent even if the
practice doesn’t perform well. This is another area where
you need a lawyer.
Local Business
License. Get a
license to do business from your city.
Employer Filings and Withholdings.
If you have employees, file form DE-1 with California EDD.
This starts the never-ending process of employment law
compliance. Hire a payroll company to handle your employee
wage withholdings.
Workers Compensation and Other
Insurance. Once you have
employees, get an insurance broker for workers compensation
insurance. Workers comp is required by law.
Use an experienced
broker to purchase your professional malpractice insurance.
Malpractice Insurance. Buy malpractice
insurance. The Accountancy Act requires malpractice
insurance, or else it makes all shareholders jointly and
severally liable for firm malpractice liabilities.
See my next article,
Accountant
employment and independent contractor agreements for an
explanation of these two important contracts.
That’s it for this bird’s eye view of the start-up of your
accountancy corporation. I hope this checklist has been helpful
to you.
Call me to schedule a
legal consultation: 510-796-9144 | 