Buying an accounting practice gets written about as a pricing problem. For a sole practitioner or a small firm taking over a retiring practitioner's book, the questions that stop a deal sit earlier than price: whether you may hold the firm permit at all, whether a seller picks you out of a queue, and whether your own balance sheet can carry the payment. In the AICPA Private Companies Practice Section's 2020 CPA Firm Succession Planning Survey, 76% of the multi-owner firms in merger and acquisition discussions were the acquiring firm, against 17% being acquired. The scarce party here is the seller, and the buyer is the one competing.
Buying an Accounting Practice Starts With the Firm Permit
Settle whether you are allowed to own the practice before you agree what it costs. Who may own a licensed firm is set by your own state's version of the Uniform Accountancy Act, the model law the AICPA and NASBA publish together.
Which Firms Have to Hold a Permit
The permit requirement follows the work and the name rather than the size of the practice. Under Section 7(a)(1) of the ninth edition of the Uniform Accountancy Act, a permit is required of any firm with an office in the state performing attest services as defined in Section 3(b) of the Act, any firm with an office in the state that uses the title CPA or CPA firm, and any firm without an office in the state that offers or renders those attest services there unless it meets four listed conditions.
The Act treats a sole proprietorship as a CPA firm, so a one-person practice carries the permit requirement on the same terms as a partnership. Attest is a narrower category than the word suggests, covering audits, reviews of financial statements and the other engagements listed at Section 3(b), while compilations get their own definition at Section 3(f) and sit outside it. The full list sits with the market-level version of this route.
The Licensee-Majority Test, Applied to the Buyer
The ownership test is about who holds the equity and the votes, and for a buyer it comes before everything else. Section 7(c)(1) requires an applicant for a firm permit to show that a simple majority of the ownership of the firm, in terms of financial interests and voting rights of all partners, officers, shareholders, members or managers, belongs to holders of a certificate who are licensed in some state (Uniform Accountancy Act, Ninth Edition). Section 7(c)(2) then allows a firm to include non-licensee owners, provided it designates a licensee responsible for its proper registration and identifies that person to the board, every non-licensee owner is of good moral character and an active individual participant in the firm or an affiliated entity, and the firm meets whatever else the board imposes by rule.
The Act's own commentary points the other way for work outside attest. It says CPAs may offer non-attest services through any type of entity they choose, and that there is no required percentage of CPA ownership for those entities, as long as they do not call themselves a CPA firm or use the term CPA in association with the entity's name. So whether a non-licensee can buy depends on what is being bought. Compliance and bookkeeping work can sit in an entity that does not hold itself out as a CPA firm. Attest work cannot follow it there, and neither can the name.
What the Change of Ownership Itself Triggers
An acquisition changes the ownership mix, and the permit rules have something to say on the day it does. Section 7(f) requires each holder of or applicant for a permit to notify the board in writing, within 30 days of the event, of any change in the identities of partners, officers, shareholders, members or managers whose principal place of business is in the state, any change in the number or location of offices in the state, any change in the identity of the people in charge of those offices, and any issuance, denial, revocation or suspension of a permit by any other state (Uniform Accountancy Act, Ninth Edition).
Section 7(g) covers the harder case. A firm that falls out of compliance with the section because of a change in firm ownership or personnel, after receiving or renewing a permit, has to take corrective action to get back into compliance as quickly as possible, and failure to do so within a reasonable period as the board defines it results in suspension or revocation of the firm permit (Uniform Accountancy Act, Ninth Edition). The Act is a model, so the version that binds you is your own state board's.
How a Book Reaches the Market, and Why You Are on the Crowded Side
Three routes carry a small practice to a buyer, and they do not leave you in the same position. The first is a direct approach to a practitioner who is thinking about retiring and has told nobody yet. The second is a listing service, including the practice-for-sale listings some state CPA societies run for members. The third is a practice broker, retained by the seller and pricing the book accordingly.
The reason the direct approach repays the awkwardness is the balance of the market. Among the multi-owner firms having merger and acquisition discussions in the AICPA Private Companies Practice Section's 2020 CPA Firm Succession Planning Survey, 76% described themselves as the acquiring firm, 17% as the firm being acquired, and 6% had sat on both sides. From the seller's chair that split reads as scarcity worth knowing about before the first call. From yours it means the practitioner you approach has probably been approached already.
Sizing the target is where that survey turns into instruction for the multi-owner firms it surveyed. It tells a firm defining acquisition criteria to consider the net annual revenue of candidates, its own term for a firm's revenue, and to aim at firms with 10% to 30% of its own, on the reasoning that too small a target may not be financially rewarding enough to warrant the time, energy and effort, while too large a one may present operational, capacity and other challenges. The most sought-after target segment was firms with revenue up to $2M in net annual revenue, and very few firms were seeking firms the same size as or larger than theirs (2020 CPA Firm Succession Planning Survey).
Read that as competition rather than as reassurance. The band most acquirers say they are shopping in is the same band a retiring sole practitioner's book sits in, so assume a listed practice already has other buyers looking at it. The edge available to a small buyer is rarely the price it can pay. It is arriving before the listing exists.
What Actually Funds a Small Practice Purchase
Three sources pay for a book, and which of them you can reach sets the size of practice you can chase. Cash you already hold is the cleanest and usually the smallest. Bank credit is the route firms most expect to use when they seek capital, a ranking the growth side of this decision sets out. A seller willing to be paid over time turns part of the price into an obligation the acquired book has to service out of its own fees.
Federal loan guarantees change what bank credit can reach. The Small Business Administration guarantees loans of up to $5 million under its 7(a) program, and changes of ownership, complete or partial, are a listed use of the money (SBA, 7(a) loans). SBA's own regulation puts it plainly: a borrower may use 7(a) loan proceeds to purchase a portion of or the entirety of an owner's interest in a business, or a portion of or the entirety of a business itself (section 120.202).
The guarantee is partial, which is the part that shapes the conversation with a bank. SBA's maximum guarantee is set by loan size: loans of $150,000 or less may receive a maximum guaranty of 85 percent, and loans of more than $150,000 a maximum of 75 percent, except as otherwise authorized by law (section 120.210). The unguaranteed remainder sits with the lender, so a lender underwrites the acquired fees rather than the seller's account of them, and the question it asks is whether those fees service the debt after you have paid yourself.
The third source interacts with the other two rather than sitting beside them. Where a seller note is subordinated to a bank facility, its timing is negotiated with the bank in the room, which is a different conversation from agreeing a headline number and belongs early rather than late. Why small deals have drifted toward terms rather than cash is a market-level story, and the money that changed the acquisition market tells it.
Diligence on the Book, Not on the Asking Price
What you are buying is the clients who stay, so the diligence that decides the outcome is about relationships and fees. What a buyer is really paying for, and how the price gets allocated afterwards, is its own exercise.
One document comes before the client list. Under section 301.7216-2(n), due diligence before a proposed sale does not constitute a transfer of the taxpayer list if it is conducted under a written agreement that keeps the tax return information confidential and bars further disclosure or use beyond the purchase, so that agreement is signed before the list opens rather than after the first friendly meeting. What that paragraph then puts on you once you hold the list is set out with the rest of the constraints on a handover.
Three readings of the book decide whether the price you agreed is the price you should pay.
Concentration on the departing owner. Work out how much of last year's fee income came from clients who have only ever dealt with the seller. That share is the part of the book most likely to leave with them, and it is what any retention adjustment will turn on later. A retention adjustment recalculates the agreed price on what the book still bills after a stated period.
Realization, client by client. Realization is the share of a job's standard value the firm actually collects after write-downs and unbilled time. A book with a respectable average can still carry a tail of clients written down every year, and those clients arrive with the work attached and the fee missing.
The fee you would charge. Decide which clients you would keep at your own rates, and what you would do with the ones you would not, before closing rather than after. A price built on the seller's fee schedule assumes those clients stay at those fees, and that assumption is what you are being asked to buy.
Whatever retention adjustment you agree, the fee base it measures and what counts as a lost client are negotiated rather than standard. Then run the concentration question again on the people rather than the clients. If one senior preparer carries half the book and leaves at closing, the purchase includes a staffing problem no clause in the agreement covers.
After Closing, the Book Lands on Your Review Desk
An acquired book does not add hours evenly. It adds whole engagements, so review hours climb roughly with client count, and they queue at the reviewer rather than at the preparer. That is the bottleneck a capacity plan finds, and the reason three of the four growth routes end in the same place. It is also why the succession survey's advice on target size carries a ceiling as well as a floor.
If any of the acquired work is attest or compilation, the purchase can create an obligation your firm has never carried. Section 7(h) of the Uniform Accountancy Act has the board require, as a condition of permit renewal, that applicants undergo peer review no more frequently than once every three years, and that the review verify that the people supervising attest and compilation services, and signing or authorizing someone to sign the accountant's report on the financial statements, meet the competency requirements in the professional standards. That requirement sits on the individual licensee who supervises the work and signs the report, which is not something a staffing decision can move.
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Where to Start
Do three things, in this order, and do them before anyone quotes a number. Read your own state board's firm ownership rule against your own certificate, because that answer decides whether there is a deal for you at all. Write down the size of book your cash, your credit and a patient seller could fund together, and use it as a filter rather than as a hope. Then count the review hours a book that size adds to a desk that already belongs to you.
The first costs a phone call to your board and an afternoon. Make it before a broker hands you a timetable, because what you may hold, what you can fund and what you can review are the three answers that decide whether the practice you find is one you can take on.