The Association option is probably the most problematic. In this case the two firms, the young start-up CPA and the established practitioner, decide to form an association instead of one party becoming a partner in the other and ultimately buying-out the other or merging the two firms. In an association each firm continues as a separate entity until the occurrence of some predefined event at which time one of the other options occur. The two firms agree to work together on specific projects or clients. To minimize potential turf conflicts, it is best that a “modus operandi” be discussed and agreed on before commencing the association. An association -as is the case with all other options- requires a clear written agreement outlining the rights, duties and limitations of the participants. An association, if it is entered into, is typically short term. An association is usually insisted on by the established practitioner who is not comfortable with merging or partnering with an individual that she or he does not know well.
Over the years, solo practitioners have used mergers as a way to grow and diversify as they sought a competitive advantage in the marketplace. Mergers have allowed firms to acquire additional expertise, a succession plan, and a broader range of clients with a minimum of capital outlay. In terms of a succession plan a merger allows the retirement-minded owner's firm to remain viable and provide the funds for the installment buy-out of the owner.
A non-equity owner shares in the firm’s income on some predetermined basis, but does not own a share of the firm’s capital and may not get a vote on all firm issues or other owner entitlements. Furthermore, a “dis-association” agreement should also be in place. The arrangement provides both parties a period of time in which to assess each other. We usually recommend that all significant future terms be addressed and resolved before the agreement is implemented.
As the name implies, this is an outright sale of the practice. Due to the type of client that we aim to help, this will more than likely not happen.
We aim to provide a service whereby young CPAs who cannot afford to purchase a practice or partnership interest to connect with older practitioners who are prepared to finance the next generation of CPAs.