As the services of an accounting practice are predominantly client-focussed, it is important to go into the purchase of the business by considering the ways in which you can maintain the business’ success with their clients. If you are planning to purchase an accounting practice, there are numerous legal aspects of the sale you can take into consideration in order to assist with this transition.
Public Practice Certificate
It needs to first be mentioned that in order to run an accounting practice as a principal, you first need to obtain your public practice certificate. Alongside educational requirements, you will also need to have a few years of professional experience. CPA Australia has further details of the application procedure and requirements to obtain your Public Practice Certificate.
Licences specific to your specialty of accounting will also be necessary. In most cases, you require the licences personally. This is not usually transferred as part of the business sale because the licences are often tied to your Public Practice Certificate. Licences could include, for example, those needed by tax agents or investment advisors.
Work in Progress
This should be a major part of your discussion with the vendor. Accounting practices often have ongoing work with their clients or have built a rapport that their clients come back for new work. It is often a good idea to discuss all clients in the practice’s portfolio. It will also be good to determine the current contractual obligations a firm has to the client and whether or not they will be transferred to you. In examining the goodwill of the business, you may need to look critically to see if there are any client problems or you may even realise some clients who you will not be able to assist due to other factors, for example, lack of expertise.
It is also important to be wary of any former debts or claims that the vendor may have against them. By looking at the client portfolio and doing your legal due diligence, you will be able to discover possible complications that may arise when you are actually operating a business. For this reason, it is important to limit your liability from the vendor’s past activities.
As goodwill is a major asset of the accounting practice, a purchaser should always consider negotiating a training period as part of the business sale. A phase-in and phase-out period would be the most ideal, as it can provide you with the time to meet important clients with the recommendation of the accountant.
This is just a small snapshot of the legal issues you need to consider in the purchase of an accounting practice. You may also be looking at taking over an existing lease, looking at the tax implications of your sale or outlining the specific assets and their worth. The LegalVision team of lawyers are specialists in the area of the sale and purchase of businesses, and would be happy to guide you through the legal aspects of your purchase!