The Veterans Business Law Group

Key Business Formation Requirements for a CPA in California

If you’re a Certified Public Accountant (CPA) in California looking to establish your own practice, it’s crucial to understand the business formation requirements specific to your profession. As a licensed professional, there are certain considerations and regulations that must be followed to ensure compliance and the smooth operation of your CPA practice.  

Here are a few things you must consider:

 

Choose the Correct Business Structure
The first decision you’ll need to make is selecting a suitable business structure for your CPA practice. In California, CPAs have several options, including sole proprietorship, partnership, limited liability company (LLC), or professional corporation (PC). Each structure has its own advantages and legal implications, so it’s essential to consult with a business attorney who specializes in professional practices to determine the most suitable option for your specific needs.

 

Register Your Business Name

Once you’ve chosen a business structure, you’ll need to register your CPA practice’s name with the California Secretary of State. It’s important to ensure that your chosen name complies with the guidelines set by the California Board of Accountancy. The name should not be misleading or imply that you offer services beyond your authorized scope of practice as a CPA.

 

Obtain Necessary Licenses and Permits

As a CPA, you already hold a professional license issued by the California Board of Accountancy. However, additional permits and licenses may be required depending on the nature of your practice. For example, if you plan to offer financial planning or investment advisory services, you may need to obtain a license from the California Department of Business Oversight or register with the Securities and Exchange Commission (SEC). Research and comply with all relevant licensing and permit requirements to ensure legal compliance.

 

Comply with Professional Liability Insurance Requirements

Professional liability insurance, also known as errors and omissions (E&O) insurance, is a vital consideration for CPAs. While it’s not mandatory in California, having this coverage protects you and your practice from potential claims arising from professional errors or omissions. It’s strongly recommended to consult with an insurance professional specializing in professional liability insurance for CPAs to determine the appropriate coverage for your practice.

 

Consider Business Tax Obligations

You’ll need to register for federal and state taxes, including obtaining an Employer Identification Number (EIN) from the Internal Revenue Service (IRS). Additionally, familiarize yourself with California’s specific tax requirements, such as sales tax, payroll taxes, and business entity taxes.

 

Starting your own CPA practice in California requires careful attention to legal and regulatory requirements. By following these key steps and consulting with the experienced business attorneys at the Veterans Business Law Group, you can navigate the business formation process smoothly and ensure compliance with all necessary regulations. Contact us today to schedule your initial business strategy session.