How to Start an Accounting Firm: CPA License, Firm Registration, and What It Actually Costs (2026 Guide)

1. Two types of accounting firms: licensed vs. unlicensed services

The first decision when starting an accounting firm is which services you'll offer, because the regulatory requirements split sharply at the line between attest and non-attest work.

Attest services — audits, reviews, and compilations — are services where a CPA expresses assurance about the accuracy of financial statements prepared by someone else. These services are reserved for licensed CPAs by law in every state. Only a CPA can sign an audit report. Only a licensed CPA firm can perform these services. If you want to do attest work, you and your firm must be licensed.

Non-attest services — bookkeeping, payroll, tax preparation, financial planning, consulting — do not require CPA licensure. You can operate a profitable accounting business without ever becoming a CPA. These services are in high demand, especially among small businesses that need reliable bookkeeping and tax preparation but don't require audited financials. The Small Business Administration estimates there are over 33 million small businesses in the U.S., and the vast majority will never need a formal audit — making the non-CPA market extremely large.

The practical implication: if you're starting with bookkeeping and tax work and plan to grow into audit services later, build your firm now and pursue CPA licensure in parallel. If audit work is central to your business model from day one, you need a licensed CPA as a principal before you open. A common path is to hire a CPA as a partner or of-counsel to sign off on attest engagements while you complete your own licensure.

Revenue potential differs significantly between paths. Bookkeeping and tax prep firms typically bill $75–$250/hour or offer monthly retainer packages of $300–$1,500/month per client. CPA firms performing audit and assurance work routinely bill $150–$400/hour for senior staff time, with small company audit engagements starting at $5,000–$15,000. The CPA path requires more upfront investment but opens access to higher-margin, regulated work.

Note that the line between attest and non-attest work can be blurry in practice. Agreed-upon procedures (AUPs) — where a CPA performs specified procedures and reports findings without expressing an opinion — are technically attest services requiring CPA licensure and firm registration in most states, even though they're more limited than a full audit. Similarly, preparing financial statements in connection with a loan application or investment transaction may cross into attest territory depending on how the statements are presented. When in doubt about whether a specific engagement requires CPA licensure, consult your state board or a practice management attorney before accepting the engagement.

2. CPA licensure: the full path

CPA licensure in the U.S. has three components: education, examination, and experience. All three must be completed before a license is issued. The requirements are set by each state's board of accountancy, but they are largely standardized through the Uniform CPA Exam and the NASBA model rules.

3. CPA firm registration with the state board

If your firm will offer attest services, you must register the firm (not just the individual CPAs) with the state board of accountancy. This firm-level permit is separate from your individual CPA license and must be maintained independently. In California, this is called a "Firm License" issued by the California Board of Accountancy. In Texas, it's called a "Firm License" from the Texas State Board of Public Accountancy. In Florida, it's a "Firm License" from the Department of Business and Professional Regulation (DBPR).

Firm registration requirements typically include:

• CPA ownership majority: Most states require that a majority of the firm's ownership — typically two-thirds or more — be held by licensed CPAs. Non-CPA owners are permitted in most states up to a minority position, but a non-CPA cannot be the majority owner or managing partner of a CPA firm that performs attest services. In California, simple majority (over 50%) must be CPAs; in Texas, a majority of the ownership interests must be held by CPAs.
• Responsible licensee: Each office location must have a designated licensed CPA who is responsible for the attest services performed from that location. This is similar to the pharmacist-in-charge concept — a named, licensed individual takes legal responsibility for the firm's professional conduct. In Florida, this person is called the "licensee in charge" and must hold an active Florida CPA license.
• Peer review: Most states require CPA firms that perform attest services to participate in a peer review program — an independent evaluation of the firm's accounting and auditing practices conducted every three years. Peer reviews are administered through the AICPA Peer Review Program or state society programs. Peer reviews cost $2,000–$10,000 depending on the firm's size and complexity. Failing a peer review or not participating can result in firm permit revocation. New York, Texas, and California all require peer review participation as a condition of maintaining the firm license.
• Continuing professional education (CPE): Individual CPA licenses require ongoing CPE — typically 40 hours/year or 80 hours/biennial cycle — to remain active. Some of those hours must be in ethics. The firm registration renewal typically requires attestation that all CPAs in the firm are current on CPE.
• Fee: Firm registration fees range from $50 to $500/year depending on the state and firm size. California charges $500 per renewal cycle. Texas charges $100/year. Florida charges $100/year. New York charges $100 per triennial period.

Processing times for firm registration vary by state. California's Board of Accountancy typically processes applications in 4–8 weeks. Texas processes in 2–4 weeks. Florida and New York are generally 3–6 weeks. Plan for this lead time before you can accept attest engagements.

4. PCAOB registration for public company audits

The Public Company Accounting Oversight Board (PCAOB) was created by the Sarbanes-Oxley Act of 2002 to oversee the audits of public companies. Any accounting firm that audits companies registered with the SEC — including publicly traded companies, registered broker-dealers, and certain investment funds — must register with the PCAOB before performing that audit work.

PCAOB registration is not relevant to most small accounting firms starting out. It becomes relevant only if you pursue public company audit work. The registration process involves:

• Submitting Form 1 to the PCAOB with information about the firm's structure, audit clients, and key personnel
• Paying registration fees — currently $500 for firms with fewer than 100 public company clients, plus annual fees that scale with the firm's audit revenue from public company clients
• Consenting to PCAOB inspections — annual for large firms (100+ public company clients), triennial for smaller registered firms
• Complying with PCAOB auditing standards (AS standards), which are separate from AICPA standards (GAAS) used for private company audits
• Maintaining independence requirements under both SEC Rule 2-01 and PCAOB Ethics and Independence Rule 3520

PCAOB-registered firms are publicly listed on the PCAOB website. An audit report signed by a firm that is not PCAOB-registered cannot be used in an SEC filing — this is an absolute bar, not a technicality that can be waived. There are currently around 1,500 PCAOB-registered firms in the U.S., down from over 2,400 at peak registration. Most small accounting firms launching today will never need PCAOB registration.

If you do want to eventually audit public companies, note that PCAOB inspections are rigorous. Firms inspected on a triennial basis (fewer than 100 public company clients) receive written inspection reports that may be made public if deficiencies are not remediated within 12 months. A PCAOB inspection finding is a significant reputational and business risk for a small firm — plan for the quality control infrastructure (documented audit methodologies, training programs, engagement quality control reviews) before taking your first public company audit client.

5. State highlights: CPA firm requirements by market

State board requirements for CPA firm registration vary meaningfully across jurisdictions. Here are the major markets with specific fee and processing details:

Fees and processing times are estimates based on published state board schedules and may change. Verify current fees directly with your state board before applying.

One important nuance: most states operate reciprocal CPA licensure arrangements, meaning a CPA licensed in one state can obtain a license in another state without retaking the exam — provided the original license was issued under substantially equivalent requirements. This matters for accounting firms opening offices in multiple states. Under NASBA's Uniform Accountancy Act, a CPA licensed in a state that has adopted substantial equivalency can practice temporarily in other substantial equivalency states without obtaining a separate license for short-term engagements. However, for a permanent office or ongoing client base in another state, most boards require formal registration as a firm in that state. Always check the target state's mobility rules and firm registration requirements before establishing a presence there.

6. Other licenses and registrations

IRS PTIN

Any paid preparer of federal tax returns must have a PTIN (Preparer Tax Identification Number) issued by the IRS. This applies to CPAs, Enrolled Agents, tax attorneys, and non-credentialed tax preparers alike. The PTIN must appear on every return the preparer signs. PTINs are renewed annually at a fee of $19.75/year as of 2026. Applying takes approximately 15 minutes at irs.gov/ptin and the PTIN is generally issued immediately upon application. If you have multiple preparers at your firm, each individual preparer needs their own PTIN — the firm does not get a single PTIN that covers all employees.

IRS EFIN (Electronic Filing Identification Number)

Any firm that files tax returns electronically on behalf of clients — which in practice means virtually every tax preparation firm — must obtain an Electronic Filing Identification Number (EFIN) from the IRS. The EFIN application is submitted through the IRS e-Services portal and requires a credit check, a suitability check, and fingerprinting in some cases. Processing typically takes 4–6 weeks. The EFIN is assigned to the firm (not to individual preparers) and authorizes the firm to submit returns electronically as an Authorized IRS e-file Provider. There is no fee for EFIN registration. You must have your PTIN before applying for an EFIN.

Enrolled Agent status (optional but valuable)

Non-CPA accountants who want to represent clients before the IRS (in audits, collections, and appeals) can obtain Enrolled Agent (EA) status. The EA exam is a three-part test covering individual taxation, business taxation, and representation/ethics. EA status is granted by the IRS and allows unlimited practice rights before the agency — the same rights a CPA has for IRS representation purposes. Each exam part costs approximately $182 and requires about 40–60 hours of preparation; preparation courses run $300–$700. The full EA process typically takes 6–12 months. For a non-CPA accounting firm that handles a lot of tax work, having at least one EA on staff is a significant competitive advantage and differentiates you from basic tax preparers who can only submit returns and cannot represent clients.

State tax preparer registration

A small number of states require non-credentialed tax preparers to register with the state and complete continuing education. Oregon requires all paid tax preparers to be licensed through the Oregon Board of Tax Practitioners — initial registration requires 80 hours of education and a written exam. California requires non-credentialed preparers to register with the California Tax Education Council (CTEC) and complete 60 hours of initial education plus 20 hours of annual continuing education. The CTEC registration fee is $33/year. Maryland requires non-credentialed tax preparers to register annually with the state; the fee is $100/year. New York requires tax preparers who are not CPAs, attorneys, or EAs to register with the state; the fee is $100 per year. If you're hiring non-credentialed preparers in any of these states, budget for the registration costs and training time.

General business license

An accounting firm needs a standard general business license from the city or county where it operates, in addition to any state board registration. This is typically $50–$300/year and is straightforward. In Los Angeles, the city business tax registration for a service firm is based on gross receipts and starts at approximately $91/year. In New York City, a business certificate (DBA filing) for a sole proprietor or general partnership costs $100; an LLC operating agreement does not require a separate business license beyond the NY state LLC filing. In Houston (Harris County), a business operations permit costs $125/year. Always check with your specific city or county, as requirements and fees vary even within the same state.

EIN (Employer Identification Number)

If your firm is organized as an LLC, PLLC, or corporation — or if you have any employees — you need an EIN from the IRS. The EIN is the firm's federal tax identification number and is used for payroll, opening business bank accounts, and filing the firm's tax returns. Applying for an EIN is free and takes about 10 minutes online at irs.gov. Even a solo CPA operating as a sole proprietor may want an EIN to avoid using their Social Security number on client-facing documents.

7. Insurance requirements

The primary insurance concern for an accounting firm is professional liability (E&O) — claims that your professional services caused a client financial harm. Accounting E&O claims are not rare: tax errors that result in IRS penalties, audit opinions that later prove inaccurate, failure to identify fraud during an audit, and financial advice that leads to investment losses are all scenarios that generate professional liability claims. The AICPA estimates that professional liability claims cost U.S. accounting firms over $1 billion annually, and solo and small firms are not immune — a single missed deadline or incorrect advice can generate a six-figure claim.

Most E&O claims against small CPA firms fall into three categories: tax preparation errors (missed deductions, incorrect elections, late filing penalties), bookkeeping errors (miscategorized transactions leading to incorrect financial statements), and failure to advise (a client who claims their accountant should have warned them of a tax consequence or business risk). Engagement letters that clearly define scope — and explicitly exclude advice on matters outside the engagement — are the most effective defense against the third category. Many E&O carriers offer premium discounts of 5–10% to firms that use standardized engagement letters and document client communications consistently.

• Professional liability (E&O): Required by most state boards for CPA firm registration and by clients as a condition of engagement. A solo CPA firm with primarily individual and small business clients typically pays $1,500–$4,000/year for $1M per occurrence / $3M aggregate coverage. Firms doing audit work or handling large corporate clients pay $5,000–$20,000+/year. The deductible structure matters — many E&O policies have $2,500–$10,000 deductibles per claim. AICPA members have access to the AICPA Professional Liability Insurance Program, which offers competitive rates for member firms. Renewal timing is important: E&O policies are written on a claims-made basis, meaning coverage must be active when the claim is made, not when the work was performed.
• Cyber liability: Accounting firms handle extremely sensitive financial data, Social Security numbers, tax returns, payroll records, and bank account information. A data breach triggers IRS notification obligations, state breach notification laws (all 50 states have breach notification statutes), and potentially significant client remediation costs. Cyber insurance covers breach response costs, forensic investigation, client notification, credit monitoring, ransomware payments, and regulatory defense. Annual premiums for a small firm run $1,000–$3,000; firms that process payroll or store significant client data should budget on the higher end.
• General liability: Covers premises liability (clients visiting your office, slip-and-fall claims) and some non-professional claims. $1M per occurrence / $2M aggregate is standard. Annual premiums are $500–$1,500/year for a small firm operating from a rented office; home-based practices may have GL coverage through a home business rider on a homeowner's policy.
• Workers' compensation: Required once you have employees in every state except Texas (where it's technically optional, though not recommended). Accounting and clerical workers' comp rates are among the lowest in any industry — roughly $0.35–$0.75 per $100 of payroll in most states. A firm with $200,000 in annual payroll should budget approximately $700–$1,500/year for workers' comp.
• Business owner's policy (BOP): A BOP bundles general liability and commercial property insurance at a discount — typically $800–$2,500/year for a small accounting firm. It doesn't include E&O or cyber, but it simplifies the insurance stack for office-based firms. Many accounting firms use a BOP plus separate E&O and cyber policies.

8. What an accounting firm actually costs to start

The cost to start an accounting firm varies dramatically based on whether you're a licensed CPA, whether you're opening a solo practice or hiring staff, and whether you're working from home or leasing office space. The following table covers the first-year costs for a solo home-based CPA firm and a small multi-staff firm with office space.

The education and exam costs (CPA path) are sunk costs before the firm opens. A home-based solo CPA practice has extremely low startup costs relative to most businesses — the real investment is in the years of education and licensure that precede it. Non-CPA bookkeeping and tax prep firms can launch for as little as $5,000–$10,000 in first-year costs since exam and licensure fees don't apply.

Working capital requirements depend heavily on how quickly you build recurring revenue. A solo CPA who launches with 5–10 bookkeeping clients on monthly retainers (generating $3,000–$8,000/month from day one) needs far less working capital runway than one who relies entirely on annual tax return revenue concentrated in February–April. Building a base of recurring monthly clients before launch is the most effective way to reduce first-year financial risk.

9. Setting fees and projecting revenue

Accounting firms price services in three common structures: hourly billing, fixed-fee packages, and value-based pricing. The right model depends on your service mix and target client profile. Understanding market rates in your geography matters — a solo CPA in rural Texas competes on different terms than one in San Francisco.

A solo CPA practice with 40 bookkeeping clients at an average of $600/month in retainer fees generates $288,000 in annual recurring revenue before any tax work. Adding 80 individual returns at $450 average adds $36,000 in seasonal revenue. A well-run solo CPA practice typically generates $150,000–$350,000 in annual revenue, with profit margins of 40–60% after software, insurance, and continuing education costs. The key lever is recurring revenue — bookkeeping retainers and payroll clients create predictable monthly cash flow that tax-only practices lack.

Geographic pricing differences are significant. CPAs in New York City, San Francisco, and Los Angeles command 30–60% higher fees than national averages, reflecting higher local costs and client willingness to pay. A Dallas-based CPA charging $500/month for bookkeeping clients that would pay $800/month in Manhattan may find that relocating or serving remote clients in higher-cost cities is more profitable than competing locally on price. Remote accounting services are fully viable — most accounting work is digital and doesn't require in-person meetings.

Transitioning to value-based pricing — where fees reflect the value delivered to the client rather than hours spent — is a revenue-maximizing strategy for experienced CPAs. A CPA who saves a client $30,000 in taxes through proper S-Corp election and retirement plan structuring can justify a $5,000–$8,000 advisory fee even if the work takes only 10 hours. Many high-earning solo CPAs deliberately cap their client count at 50–75 clients and charge premium prices for deep advisory relationships, generating $400,000–$600,000 in annual revenue while maintaining manageable work hours. This model requires technical depth and client trust built over time, but represents the highest earnings potential available to a solo CPA practitioner.

10. Step-by-step: opening an accounting firm

Once licensure requirements are met (or if you're opening a non-attest practice), the operational steps to open are predictable. Here's the full sequence:

1. Step 1.Choose your services and niche. Define whether you'll offer bookkeeping, tax preparation, audit/attest, advisory, or a combination. Specializing in a niche (real estate investors, medical practices, e-commerce businesses, law firms) accelerates client acquisition and allows premium pricing. Niche practices also enable deeper expertise, reducing errors and liability exposure. A bookkeeping firm serving only e-commerce brands, for example, can build deep expertise in sales tax nexus and inventory accounting that justifies charging 20–30% above generalist rates.
2. Step 2.Select and form your entity. Choose between sole proprietor, PLLC, PC, or S-Corp structure. Confirm your state board's entity requirements for CPA firm registration before forming — California and some other states restrict CPA firms to specific entity types. Filing fees with the Secretary of State range from $50 (Kentucky) to $500 (Massachusetts); most states charge $100–$200. An operating agreement for an LLC or PLLC should address what happens to the firm if a partner's CPA license lapses, since most state boards require CPA-majority ownership to maintain firm registration.
3. Step 3.Obtain your EIN. Apply free at irs.gov. Takes 10 minutes; EIN is issued immediately. You'll need the EIN to open a business bank account, set up payroll, and complete IRS e-file provider registration. Do this before opening a bank account.
4. Step 4.Apply for PTIN and EFIN. If you're preparing tax returns, apply for a PTIN ($19.75) at irs.gov/ptin — it's issued immediately online. Apply for an EFIN through IRS e-Services immediately after getting your PTIN. Allow 4–6 weeks for EFIN processing; do not commit to preparing returns for filing season without an EFIN in hand.
5. Step 5.Register CPA firm with state board. If performing attest services, submit your firm registration application with your state board of accountancy. Allow 2–8 weeks for processing depending on your state. Pay the applicable registration fee ($75–$500). Do not sign any audit or review engagement letters until the firm registration is confirmed in writing — practicing without firm registration is an ethics violation that can result in license suspension.
6. Step 6.Obtain business licenses. Apply for a general business license from your city or county ($50–$300). In California, many cities require a separate business tax certificate; in Texas, many cities have no local business license requirement for professional firms. Check whether a home occupation permit is required if working from home — some residential zones restrict client-facing business activity.
7. Step 7.Bind insurance. Obtain E&O, cyber, and general liability coverage before accepting your first client. Many carriers offer same-week binding for small professional firms. The AICPA Professional Liability Insurance Program is a natural starting point for CPA firm members; compare it against brokers specializing in professional services (Hiscox, CNA, CAMICO, and USI are common E&O providers for accountants).
8. Step 8.Set up your tech stack. Select and subscribe to accounting software, tax software, and practice management tools. Set up a secure client portal for document exchange (Sharefile, SmartVault, or TaxDome's built-in portal) before sharing client financial data. Never exchange sensitive documents via unencrypted email — this is both a security risk and a potential IRS Safeguards Program violation for firms handling tax data.
9. Step 9.Open a business bank account. Separate business and personal finances from day one. You'll need your EIN, entity formation documents (articles of organization or articles of incorporation), and the entity's operating agreement or bylaws to open a business account. Many CPAs also open a separate client trust account (IOLTA) if they hold client funds, though most accounting firms avoid holding client money due to the compliance overhead.
10. Step 10.Draft engagement letters and set your fee schedule. Use a signed engagement letter for every client defining scope of services, fees, limitations of liability, and dispute resolution. A standard engagement letter template is available through AICPA; customize it to your practice. Set your fee schedule and be explicit about what is and isn't included — scope creep is one of the most common causes of low profitability in solo accounting practices.

The entire operational setup process — from entity formation through first client engagement — takes 6–12 weeks for a CPA who is already licensed. The EFIN application is usually the longest single step at 4–6 weeks. If you're starting during September through December, apply for your EFIN immediately — IRS e-Services gets backed up in January as tax season firms rush to get authorized, and a delayed EFIN can mean missing the early filing window.

For first clients, referrals from former colleagues, family members, and professional network contacts close fastest. Consider offering a discounted initial engagement to a handful of clients in exchange for a testimonial and referral. Most solo accounting practices spend $0 on formal advertising in their first year and build their initial client base entirely through professional referrals and local networking. Once you have 10–15 clients with consistent work, focus on asking for referrals systematically — accounting clients who are satisfied rarely switch firms, and a referral from a trusted client is the highest-converting client acquisition channel in the profession.

11. Common mistakes when starting an accounting firm

Most first-year accounting firms that struggle do so because of avoidable operational or compliance mistakes, not a lack of technical accounting skill. Here are the most frequent issues and how to avoid them:

Frequently asked questions

Official Sources

• AICPA: CPA Licensure Requirements
• NASBA: National Association of State Boards of Accountancy
• PCAOB: Firm Registration
• IRS: Preparer Tax Identification Number (PTIN)
• SBA: Apply for Licenses and Permits
• IRS: Employer Identification Number
• AICPA: Professional Liability Insurance