Can a CPA Start an LLC for a Client?

What Are the Benefits of Using an Accountant for LLC Formation?

Utilizing a CPA’s services when forming an LLC can have many business benefits, including:

Overall Knowledge

CPAs offer comprehensive consultations to understand your business goals, financial situation, and long-term plans. By considering tax implications and your monetary objectives, they can help you choose the most appropriate business structure. Lastly, and this is a vital step for launching your business, CPAs can prepare and file the Articles of Organization and other required documents after you select a business structure. 

Expertise in Taxation

One of the primary benefits of using a CPA for LLC formation is their experience with tax planning. A CPA’s strength lies in their thorough understanding of tax laws, which can significantly benefit a business owner during the formation phase. CPAs can provide valuable insights into the tax implications of different business structures and help you choose the most tax-efficient option. By leveraging their knowledge and structuring an LLC to optimize tax outcomes, they can also help you minimize tax liabilities and take advantage of various deductions and credits. 

Cost Efficiency

For startups and small businesses watching their budgets, a CPA’s LLC startup cost is often more affordable than hiring a law firm. The combination of competitive fees and the financial advice CPAs provide can lead to significant long-term savings, making CPAs an intelligent initial investment and an attractive option for entrepreneurs.

Long-Term Financial Strategy

The role of a small business accountant encompasses ongoing financial advice that extends beyond the initial formation of the LLC. They are also very helpful in keeping your company compliant and thriving financially. CPAs offer comprehensive assistance with ongoing accounting, financial planning, and compliance with tax regulations, ensuring the company remains financially healthy and in step with all regulatory requirements. Small business owners also benefit significantly from this continuous support, as they can address financial challenges promptly and strategically. Moreover, a CPA’s insights can influence critical business decisions, driving profitability and growth.

How Does a CPA Benefit from Setting Up an LLC? 

For a CPA, offering business formation services also has many benefits. Here are just a few. 

Gain a Powerful Competitive Edge

Providing a more extensive array of business services than other accounting firms can differentiate CPA firms in a crowded market. By managing business filings, CPAs distinguish themselves and attract more clients, catering more comprehensively to your customers’ needs. This proactive approach improves client satisfaction and positions your firm as a holistic solution provider in a tight financial sector. Further, offering these tailored services encourages clients to rely on your firm for all their financial needs.

Enhance Customer Loyalty

Offering extra services helps you establish yourself as a dependable and trusted advisor. The more services you offer, the greater the value clients see in their relationship with you. And the more value clients attribute to their relationship with you, the higher the likelihood that they will continue their partnership with you as they grow their enterprise. This multifaceted approach helps to build a stronger connection with your clients and ensures that they see your firm as essential to their ongoing success. Plus, continuously adapting to meet evolving needs demonstrates a commitment to business growth, significantly strengthening client loyalty.

Generate Profits

Introducing business formation and compliance services creates a new revenue stream with the potential for consistent income year-round. Diversification evens out income fluctuations as it helps make the best use of resources during slow periods outside of tax season, when accounting firms often make less money. And in the end, expanding your firm’s services helps attract more customers and increases profitability.

What Are Potential Roadblocks When Using an Accountant for LLC Formation?

Overall, working with a CPA to set up an LLC offers numerous benefits and few drawbacks. But as mentioned previously, there are several caveats to consider:

Legal Boundaries

CPAs must navigate the fine line between accounting and legal advice. The unauthorized practice of law is a serious regulatory concern, and CPAs who draft contracts or provide legal advice without a law license may face legal repercussions. While CPAs can handle many aspects of LLC formation, they are not licensed to provide legal advice unless they hold a legal license. This means that a qualified attorney should address complex legal issues like drafting operating agreements or handling disputes. The significance of this cannot be overstated. 

Regulatory Variations

State regulations regarding who can assist with LLC formation vary. Only licensed attorneys can prepare and file certain legal documents in some states. In others, more stringent regulations require specific disclosures or limit the extent to which a CPA can be involved in the filing process without engaging an attorney. CPAs must be aware of these rules and comply with the specific regulations in their state to avoid legal issues.

Perception Issues

CPAs may also face perception challenges. For example, clients sometimes erroneously believe that an attorney must set up an LLC to ensure that it is done correctly. Some people think that forming an LLC through a lawyer provides more legal security. Overcoming this perception requires CPAs to articulate the value and scope of their services clearly, including their experience, skill, and the value they bring to the LLC formation process. Ensuring clients understand the robustness of their support and emphasizing strengths in tax planning and financial management are essential.

What Role Does a Lawyer vs. Accountant Play in Business Formation Services?

When it comes to business formation services, both CPAs and lawyers play crucial roles. However, their expertise and focus areas differ significantly. Lawyers specialize in legal aspects, such as drafting operating agreements, ensuring compliance with state laws, and protecting intellectual property. On the other hand, CPAs focus on the financial and tax implications, providing strategic advice to minimize tax liabilities and maximize economic benefits. Essentially, attorneys handle the legal intricacies of forming a business, while CPAs provide the financial foresight needed to structure it advantageously from a tax perspective. Their roles are not in competition but complementary, providing a complete foundation for new business entities.

What Specifically Does a CPA Do That a Lawyer Doesn’t?

A CPA’s business formation services involve various tasks required to establish a business entity legally while ensuring they optimize all financial and tax aspects. These tasks include choosing the appropriate business structure, filing necessary documents, and complying with state and federal regulations. CPAs are well equipped to handle these tasks due to their extensive knowledge of tax regulations, financial planning, and business management. 

Once again, both professionals can assist in forming an LLC. Just keep in mind that their roles are complementary rather than interchangeable. Ultimately, choosing a CPA or lawyer for LLC formation depends on your specific needs and preferences. In many cases, entrepreneurs can benefit from the combined expertise of both professionals to build a solid foundation for their new business.

How Much Does an Accountant Charge to Set Up an LLC?

The cost to start an LLC varies depending on the complexity of the business structure, the state in which the business is formed, and what specific services are needed. CPAs typically charge a flat fee or hourly rate for their services. On average, starting an LLC with a CPA ranges from $500 to $1,500. These fees typically include preparing and filing necessary documents, tax planning, and initial consultation. Additional services, such as ongoing bookkeeping, financial planning, and tax compliance may incur extra charges. Lawyers usually charge higher fees for LLC formation due to their specialized legal expertise. While a CPA may charge around $1,000, a lawyer’s fees can range from $1,000 to $2,500 or more, depending on the complexity of the legal work.

It’s also important to remember that the person you choose to help set up your LLC can save you money in the long run. So keep in mind that selecting the type of professional to help with your business formation services isn’t just about setting up an LLC, it’s also about gearing up for long-term financial efficiency and compliance. A CPA’s involvement can transcend basic formation, providing ongoing business formation services such as accounting, financial statement preparation, and strategic tax planning. These services are all crucial for the smooth operation and growth of a small business and can potentially save you money in the long run.

What Other Business Filings Can Businesses and CPAs Work On Together?

Helping clients with LLC registration is the starting point for the diverse filing services a CPA can offer to streamline business operations and growth. Beyond the basics, CPAs can collaborate with you on compliance and regulatory filings critical for maintaining good standing and legal operations. This work includes managing complex tax filings, preparing financial disclosures, and handling license renewals that various government agencies may require. CPAs can also guide companies through the intricacies of international business operations, such as foreign qualification filings for expanding overseas. By leveraging their expertise in these areas, CPAs provide invaluable support that helps businesses navigate the challenging landscape of compliance and governance.

Other formation and compliance services CPAs can provide include:

• S corporation status—for businesses already set up as a C corporation or LLC, CPAs can facilitate the application process for S corporation tax status.

• Incorporation services—for clients looking to establish themselves as a C corporation or another type of corporate entity, CPAs can manage the business registration filings required.

• Doing Business As (DBA) registration—a vital step for many businesses, CPAs can aid clients in filing their fictitious name registration form.

• Employer Identification Number (EIN)—CPAs can assist clients in securing their federal tax ID number by managing the EIN application process.

• Articles of Amendment—when a business undergoes significant changes, such as a name change, relocation, shifts in business activities, or changes in LLC members or corporate directors, CPAs can file the necessary Articles of Amendment with the state. 

• Beneficial Ownership Information (BOI) Reporting—CPAs can support both new and existing businesses in completing and submitting required BOI reports. (However, please note that many CPAs and attorneys believe that BOI compliance is a legal matter and should be handled by attorneys rather than CPAs.)

By offering these and other comprehensive services, CPAs can significantly ease clients’ burdens and provide peace of mind, helping them focus more on growing their businesses while ensuring compliance with legal and tax regulations. Engaging a CPA early in the process can help you create a well-founded business poised for success and provide substantial financial and strategic benefits.

Disclaimer: Bizee and its affiliates do not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any transaction.