Starting An Accounting Firm: Your Essential Checklist  

Every year, thousands of certified accountants consider “going it alone” and starting their own accounting practice. Often, they see an opportunity to leave the safety of working for an established firm behind and strike out by themselves.  

Accountants set up independent firms for several reasons:  

• More control over working hours 
• The potential for higher pay 
• The chance to work with new clients 
• An opportunity to employ a team of accountants and assistants 

However, this path isn’t without its challenges. While setting up a CPA firm might offer better pay and more autonomy, it requires careful planning and coordination.  

So, if you are planning on starting up your own firm, what should you do?  

Legal requirements for setting up a new business in the USA  

The legal requirements for setting up a new business in the USA are fairly minimal. However, you must follow them. If you don’t, authorities could fine you, shut down your business, or even prosecute you if they believe it is in the public interest.  

To set up a regular firm in the USA, you must:  

• Obtain your Employer Identification Number (EIN) from the IRS (You need this if you plan to hire anyone, including HR assistants, cleaners, etc.) 
• Obtain your Tax ID number. 
• Decide on your business’s structure. (For accounting firms, you will usually choose a limited liability company or a professional limited liability company).  
• Open a business bank account. 
• Open a business merchant account if you want to accept credit and debit cards. 
• Buy mandatory business insurance (e.g. public and professional liability cover, workers’ compensation, etc.) 
• Develop a handbook of internal policies and governance rules. 
• Hire any reception staff or additional employees required. (Some tax rules classify partners as “employees,” so always check.) 
• Obtain any licenses from government authorities to operate your business in your chosen area. 

Finding business licensing requirements is the most challenging step for many companies. Usually, you need to research state, county, and city regulations (which vary substantially). The best place to start is the Secretary of State’s website for local government agencies.   

If you need further help setting up a business or general resources, go to the Small Business Administration website. It provides more details on things like business licensing and permits. It can also tell you which insurance you require.  

Legal details on business licensing compliance relating to public safety and professional standards can be found at various sites across the web. Note that most accounting firms do require a license.   

Key accounting services offered by practices 

Before starting an accounting firm, think about the services you want to offer. Specializing makes sense if there is an opening in the local market, though you can still provide generic accounting services if you feel more comfortable with these. 

Tax Services 

For example, almost all accounting firms offer tax-related services. These are essential for contractors, small businesses, and large corporations. Most customers rely on you to file accurate returns to the IRS to avoid penalties and audit investigations.  

Tax services include:  

• Corporate tax filings 
• Strategies to minimize cross-border taxation 
• Income tax returns 
• Tax planning for business mergers, retirement, and other life milestones 

Auditing  

Auditing is another popular accounting service. Accountants examine financial statements to ensure they comply with accounting standards (US GAAP) and meet regulatory requirements. Firms sometimes call these “assurance services” because they assure clients they are following the law.  

Auditing is critical for heavily scrutinized publicly traded companies. Large Fortune 500 firms seeking to comply with SEC regulations often seek top accountants to assist them, especially during M&As. However, they can also be helpful for at-risk smaller enterprises.  

Bookkeeping  

Bookkeeping is another service that many accountants offer, which involves keeping systematic records of financial transactions, including purchases, receipts, and payments. Government regulations mean that private firms must maintain paper and online statements of the activities for up to seven years (depending on the record type).  

Services in this category include:  

• Preparing financial statements 
• Integrating accounting software into business technology stacks  
• Working with in-house teams to develop accounting record checklists 

Advisory Services 

Finally, accounting firms can offer advisory services, which are becoming more critical as tax code complexity grows. Services in this category include:  

• Risk management 
• Cash flow forecasting 
• Financial strategy development 
• Due diligence (especially during M&As) 
• Financial policies to support ESG objectives  
• Tax advisory 

Advisory services are where you can develop your niche appeal. If you can consult on accounting issues no one else in your area can, you can build a more robust client base.  

Payroll Services 

Payroll services are another valuable offering accounting firms can provide to help client manage one of their most critical and time-consuming functions. By offering outsourced payroll within your firm, clients receive accurate and timely compensation for their employees while complying with tax regulations and labor laws. 

Specific payroll-related services include: 

• Processing employee paychecks, including calculating wages, deductions, and taxes 
• Managing direct deposit setups and payments 
• Ensuring compliance with federal, state, and local payroll tax regulations 
• Handling payroll tax filings and payments 
• Preparing and issuing W-2s, 1099s, and other year-end tax forms 
• Tracking and managing employee benefits, vacation, and sick time 
• Setting up payroll systems integrated with other accounting tools for streamlined management 

Offering payroll can set your firm apart and help your clients find reliable support for their workforce needs. 

Starting an accounting firm: A detailed checklist 

This section introduces a detailed checklist for starting your accounting firm.  

Step 1: Complete the necessary requirements for all U.S. businesses 

First, make sure you can meet the essential requirements for setting up a USA business, including obtaining your EIN, tax ID, and other critical licensing requirements (discussed above).  

Step 2: Ensure you have proper accounting qualifications 

Next, check you have the proper accounting qualifications.  

You can open an accounting company without any professional qualifications in a managerial capacity and then hire qualified accounts, but this approach is rare. Most successful firms are run by people who understand accounting and tax law inside out.  

Step 3: Check your experience 

After that, think about how much experience you have and whether you feel confident launching by yourself. Most accountants who start CPA firms have a few years of general practice under their belts before striking out alone. 

For many, this experience is critical for avoiding burnout and mistakes. Clients don’t like it when their accountants file incorrect tax returns or miss opportunities to save them money.  

Furthermore, extra years of work at a regular firm help in complex cases. The more on-the-ground knowledge you have, the better able you are to resolve challenging issues.  

Step 4: Build Your Funds 

Unfortunately, setting up an accounting firm from scratch isn’t free: it requires funding. But how much capital do you need?  

Most professionals advise enough cash to see you through the first six months of operations. Depending on your location, you may require tens of thousands of dollars.  

Where you get your money also matters. Self-funding gives you the most control but is also the highest risk. You can do what you want with the money, but you could also lose your personal assets if things don’t work out, like your home and savings.  

Finally, you can apply for a business loan. Banks and other lenders will require a solid business plan so you must prove that your concept is viable and that your firm can win clients. If you have some already, that helps.  

Starting your firm in a home office is the least expensive option. Licensing fees, office supplies, accounting software, and insurance will likely total $2,500, with other items, like office rentals and commercial space, costing $25,000 or more. 

Step 5: Apply For Your CPA License 

For a CPA business license in the USA, you must pass the Uniform CPA Examination and complete minimum semester hours while gaining relevant experience.  

The specific requirements are as follows:  

• Sufficient credit hours in accounting and business-related courses (usually 150)  
• Minimum work experience under a licensed CPA (usually 1 to 2 years) 
• Passing of the Uniform CPA examination (minimum score of 75 on each of the three four-hour CPA exams) 

Once you meet these experience and educational requirements, go to your state’s Board of Accountancy and apply for the CPA license where you want to practice. When you submit your application, you may also need to supply:  

• Fees  
• Proof of work experience (e.g., two years of work at a recognized accounting firm) 
• Transcripts of your examinations and coursework 

Administrators will process your application and then grant you the license. You can wait for certification or meet the requirements in advance and start setting up your businesses immediately to win clients.  

Step 6: Use Accounting Firm Practice Management Software 

Once you are in your office, the final step is to set up your operations and start practicing. You already know how to be an accountant, but you don’t always know how to run every aspect of a business.  

That’s where IRIS’s accounting firm practice management software helps. It balances operational efficiency with client satisfaction and financial performance, providing an all-in-one solution.  

• Greater employee productivity. IRIS Firm Management empowers teams to do their work and moves them beyond conventional management challenges. Designed for accounting practices, it offers unique benefits that are hard to find with generic solutions.  
• Automated rote tasks. IRIS allows accounting practices to automate regular workflow tasks like billing, scheduling, and time sheet recording, slashing mental effort while improving service clarity and accuracy. 
• Simple filing. IRIS offers secure document management and data storage. The solution includes template folders for speeding access to critical files while protecting confidential client information.  

The benefits of using IRIS when setting up an accounting firm are extensive and include:  

• Protecting your profitability by identifying the most promising clients with the highest lifetime value to your firm 
• Increasing productivity by automating rote tasks, reducing the effort and time HR professionals, admin staff, and employed accountants need to apply to items a computer can process 
• Enhancing insights by providing detailed reports on every aspect of the business for better decision-making from the top level on down 

FAQs 

If I’m not a Certified Public Accountant (CPA), do I need one to open an accounting firm? 

No, you don’t need to open an accounting firm if you’re not a CPA, although you can in a purely managerial role.  

The best approach is to earn your CPA via the usual route and consider setting up a private accounting practice. Business skills are valuable, but understanding the field and your work is, too.  

How much should accountants charge per hour? 

What you should charge per hour depends on:  

• Your experience 
• Your location 
• The complexity of the work 
• The size of the client 

Most accountants charge between $150 and $400 per hour for individual client and corporate work. However, when you run your own business, your fees are up to you.  

How profitable is owning your own accounting firm? 

Owning your own accounting firm can be highly profitable. However, ensuring your practice stands out from the competition is challenging. More than 88,000 private accounting practices work across the United States, meaning that there are likely thousands already working in your state. Data show that accounting firms have higher average profit margins (18.4%) compared to other U.S. private companies (8.9%), with the most profitable firms achieving 25-30% margins. 

What types of insurance do accounting firms require?  

Because they offer professional services, accounting firms require multiple insurance types, including general liability insurance (to protect against on-site liabilities), professional liability insurance (for negligence claims, errors, etc.), and workers’ compensation insurance if they employ staff. Nice-to-have extras include cyber insurance to protect against data-related losses and business interruption insurance if some natural or man-made disaster interrupts the company’s regular operations.  

What business structure should I use for my accounting firm?  

Learning how to start an accounting firm always involves considering the structure. A sole proprietorship is where you are the sole owner liable for any of the firm’s losses. Avoid this option if you took on debt to start the firm. Partnerships are another option. However, you need to trust your partners 100% and be okay with sharing the financial risks. For most accounting practices, LLCs are the best options. These protect against losses and make your firm more respectable.