CPA firms: Expect the unexpected
Anne Janotta Erickson, MNCPA membership marketing team leader | December 2021/January 2022 Footnote
Editor's note: Updated November 29, 2021
Benjamin Franklin famously quipped, “Nothing is certain except death and taxes.”
Why, then, is succession planning such a challenge for CPA firm owners to discuss? Avoiding this important topic today will surely make for headaches tomorrow.
Take a different approach by proactively discussing what happens to the structure of your firm should you, or another owner, pass unexpectedly.
Don’t forget to incorporate the Minnesota Board of Accountancy’s (BOA) rules into your succession-planning discussion. Doing so will help you to avoid complications, especially if non-CPA owners are involved.
A death in the firm
CPA firms have 30 days to notify the BOA of changes to the firm’s ownership structure. Notification must be submitted in writing.
The BOA recognizes that in the days following the death of a CPA firm owner, they are the last phone call you will want to make.
Don’t let that stop you.
Contacting the BOA is a necessary step in the transition process. Remember, they’re there to help. Staff can review the rules and options available to you under the law.
Questions to consider prior to calling include:
- Will the firm need to be dissolved, sold or merged?
- Will there be a new non-CPA minority owner?
- Has a non-CPA owner of a firm statement been submitted?
Understanding non-CPA firm ownership
Non-CPAs can be part owners of a CPA or sole proprietorship firm, but their ownership cannot exceed 49% in terms of financial interest or voting rights. The simple majority — 51% — must belong to the CPA owners.
Firms without simple majority CPA ownership cannot operate or advertise as a CPA firm or sole proprietorship.
If a CPA’s death results in minority ownership by the remaining CPAs, the firm will need to make ownership adjustments or cease to practice.
Don’t navigate this tough topic alone. Contact the BOA for guidance at
651-296-7938 or www.boa.state.mn.us.
The MNCPA is here to help! Reach us with questions at 952-831-2707 or email@example.com.