The accounting industry is one of the most profitable industries, with a market growth projection of about $735 billion by 2025. With this kind of growth projection, starting an accounting practice is a lucrative opportunity for anyone with the right skills and qualifications.
However, starting an accounting practice is not as easy as it sounds. There are a lot of intricacies to consider before starting your own firm. The industry is also quite competitive, and to be successful, you need to have a well-thought-out plan.
In this comprehensive guide, we’ll walk you through every step of starting a successful accounting practice. You’ll have all the information you need on how to run an accounting company by the end of this guide.
Create a Comprehensive Business Plan
Before you open an accounting firm, you need to create a comprehensive business plan. This document will serve as your roadmap for starting and running your firm, so it’s important to take the time to do it right.
Some of the key elements you’ll need to include in your business plan are:
Your mission statement: What is your accounting practice all about? What are your core values, and what sets you apart from other firms?
Your target market: who will you be serving with your firm?
Your marketing strategy: How will you reach your target market and get them to use your services?
Your financial projections: what do you expect your revenues and expenses to be over the next few years?
One of the most integral aspects of a business plan is the startup and ongoing costs. When starting an accounting practice, some costs will involve office space, office supplies, internet, equipment, computers, accounting software, hiring staff, advertising, insurance, and marketing.
What About the Ongoing Expenses?
In addition to the startup costs, there are also ongoing expenses associated with running an accounting practice. These costs can include:
- Rent or mortgage payments
- Utilities
- Insurance premiums
- Payroll for staff members
- Advertising and marketing expenses
- Accounting software subscription fees
- Professional development courses and memberships
You also have to factor in your own salary when projecting the financials for your accounting practice.
Name Your Accounting Business
Your name is the first impression potential clients will have of your business, so you want to choose something that reflects the professional image you’re trying to project.
At the same time, you don’t want to be so generic that you blend in with the rest of the accounting firms out there.
Here are a few tips to help you choose the perfect name for your new accounting firm:
- Keep it simple
- Make it easy to pronounce
- Avoid using acronyms
- Use keyword-rich keywords
- Test it out
Before registering your business name, you first need to search for it to ensure no one else uses it. Check for web domain availability, the state business records, as well as state and federal trademark records.
Get Funding for Your Accounting Business
If you’re starting an accounting practice from scratch, you’ll need to find the startup capital to get it off the ground. This can come from personal savings, loans from friends or family, or small business loans from banks or other financial institutions.
Here are some excellent funding options:
SBA Loans
The U.S. Small Business Administration offers several loan programs specifically for small businesses, including startups. To qualify, your business must meet certain size and credit criteria.
Equipment Financing
If you need to purchase accounting software or other equipment for your business, you can finance it through a lender specializing in equipment financing. This type of loan is typically repaid over a shorter term than a traditional business loan.
Angel Investors
Angel investors are individuals who invest in small businesses, typically in exchange for equity. If you can find an angel investor who’s interested in your accounting business, they may provide the funding you need to get started.
However, keep in mind that giving up equity in your business can be a risky proposition. Angel investors come with their pros and cons, so consult with an attorney or other advisor before entering into any agreements.
Choose the Best Software Programs for Your Business
There are many different types of accounting software programs available on the market, so it’s vital to do some research to find the one that best suits your needs.
One of the most valuable programs for accountants is practice management software. This type of software helps you to keep track of your clients, their financial records, and appointments.
There are also many other types of software programs available that can be useful for accounting firms. Some of these include tax preparation software, time tracking software, and project management software.
Find an Optimum Location
The location of your accounting business is essential for several reasons. You want to be sure you’re in a place where there is demand for your services. You’ll also need to factor in the startup costs associated with renting or purchasing office space.
Here are a few things to keep in mind when choosing a location:
- Zoning regulations
- The size and potential of the market
- The competition you’re up against
- The cost of doing business in that area
Moreover, you want to be situated in a location that’s comfortable and convenient for both you and your clients. Choose a location that’s easily accessible and has plenty of parking.
You should also consider the amenities in the area, such as restaurants, cafes, and other businesses that your clients may frequent.
Form a Legal Entity for Your Accounting Business
A legal entity can be a sole proprietorship, partnership, limited liability company (LLC), or corporation. You will need to consult with an attorney to determine which entity type is best for your accounting business.
Sole Proprietorship
A sole proprietorship is the simplest business structure and can be formed by one individual. There are no formalities required to establish a sole proprietorship, which makes it easy and inexpensive to set up.
The downside is that you’ll have unlimited liability, meaning you’ll be personally responsible for all debts and liabilities of the business.
Partnership
A partnership is a business structure formed by two or more individuals. Partnerships can be either general partnerships or limited partnerships.
General partnerships provide unlimited liability to all partners, while limited partnerships have at least one partner with limited liability. Limited partnerships are more complex to establish than sole proprietorships and general partnerships.
Limited Liability Company (LLC)
An LLC is a business structure that offers limited liability to its owners. One or more individuals can form LLCs, and there are a few formalities that need to be completed when setting up an LLC.
This is by far the most suitable for your accounting business, as it provides personal asset protection.
Corporation
A corporation is a business entity that offers limited liability to its shareholders. Corporations are more complex to establish than other business structures, and there are ongoing maintenance requirements. This type of business structure is typically only used by larger businesses.
Get an Employer Identification Number (EIN)
Obtaining an Employer Identification Number (EIN) from the IRS is an integral part of starting an accounting practice. This nine-digit number serves as your business’s tax identification number.
You’ll need this number when filing your taxes, opening a business bank account, and hiring employees.
To get an EIN, you can either apply online, by mail or via fax. The process is relatively simple and only takes a few minutes.
You’ll need to obtain an EIN if you’re forming a partnership, LLC, or corporation. If you’re starting a sole proprietorship, you can use your Social Security Number instead.
Register Your Accounting Firm for Taxes
As a small business owner, you must register for various state and federal taxes. The taxes you’ll need to pay will depend on the business structure you choose, as well as your location.
The most common types of business taxes are income tax, self-employment tax, payroll tax, and sales tax. You may also be required to pay other taxes, such as property tax and excise tax.
It’s important to consult with an accountant or tax attorney to ensure you’re paying all the necessary taxes. Failure to pay taxes can result in hefty penalties, so it’s best to err on the side of caution.
Get a Business Bank Account and Get Credit Cards
Once you have your EIN, you can open a business bank account. This is a separate account from your personal account and will make it easier to track your business expenses. It’s important to keep good records of all your expenses, as you can deduct them come tax time.
The best thing about having a designated bank account is that you’ll have personal asset protection. This means that if your business is ever sued, your personal assets will be protected. Separating your accounts is one of the best business management tips you can implement for optimum business success.
In addition to a business bank account, credit cards will make it easier to track expenses and take advantage of rewards programs. They’ll also help you build business credit, get better interest rates, and get higher lines of credit, which can be useful down the road.
Obtain Necessary Licenses and Permits
To start an accounting practice, you’ll need to obtain the necessary licenses and permits from the state in which you plan to do business. Each state has different requirements, so be sure to check with your local licensing board to find out what’s required in your area.
You’ll also need to be a certified public accountant (CPA) to start an accounting practice. To become a CPA, you must pass the Uniform CPA Examination and meet other requirements set forth by your state’s board of accountancy.
Additionally, you need a Certificate of Occupancy (CO) to operate your business from a commercial space. You must submit an application to your local building department and pass an inspection to get a CO.
Get Appropriate Insurance Policies
As a business, you’re exposed to certain risks. To protect yourself and your business, you need to have the appropriate insurance policies in place. You will need professional liability insurance, also known as errors and omissions insurance.
This will protect you in the event that a client alleges that you made a mistake in your work. You’ll also need business insurance to protect your business in the event of a loss.
Even more critical is a workers’ comp insurance if you have employees. This will protect you in the event that an employee is injured on the job. Without workers’ comp insurance, you could be held liable for the medical expenses incurred by the injured employee.
Promote and Market Your Firm
You’ve done the hard part and set up your accounting practice. Now it’s time to get the word out there and start acquiring clients. Marketing and promotion are key to getting your accounting firm off the ground.
Here are a few ideas to get you started:
Create an Online Presence
In today’s day and age, it’s essential to have an online presence for your business. Creating a website is a great way to get started.
Be sure to include information about your accounting practice, as well as your contact information. You can also create social media accounts on platforms like Twitter and Facebook.
Get Involved in Your Community
Attend business networking events, sponsor a little league team, or donate to a local charity. When people see that you’re invested in the community, they’ll be more likely to do business with you.
Send Out Direct Mail
Direct mail can be a great way to reach potential clients. Send out postcards or flyers to businesses in your area, letting them know about your accounting firm and what services you offer.
The Ultimate Guide to Starting an Accounting Practice
Starting an accounting practice can be a daunting task, but with the right planning and execution, it can be a successful endeavor.
Be sure to obtain the necessary licenses and permits, get appropriate insurance policies, and promote and market your firm. With hard work and dedication, running an accounting firm can be a rewarding experience.
Did you find this article in-depth and helpful? If you did, now you know what it takes to start a successful accounting business. Check out our blog for more informative content.