{'fraction_non_alphanumeric': 0.03334138680840783, 'fraction_numerical': 0.006281710558105823, 'mean_word_length': 4.694635488308116, 'pattern_counts': {'":': 0, '<': 0, '<?xml version=': 0, '>': 0, 'https://': 0, 'lorem ipsum': 0, 'www.': 0, 'xml': 0}, 'pii_count': 0, 'substrings_counts': 0, 'word_list_counts': {'cursed_substrings.json': 0, 'profanity_word_list.json': 0, 'sexual_word_list.json': 0, 'zh_pornsignals.json': 0}}
Preparing for What's Next: Practice-Continuation Agreements Can Provide a Smooth Transition to a Successor for a CPA Practice

CPAs do a masterful job of taking care of their clients' business, but they also need to make sure they look out for their own. Just 6% of the CPA sole practitioners responding to the 2012 AICPA Private Companies Practice Section (PCPS) Succession Survey reported having a practice-continuation agreement (PCA) in place with another practice. In the 2014 PCPS Management of an Accounting Practice (MAP) Survey, just 3% of practices with less than $200,000 in annual revenue reported having a PCA in place with another practice. Most practices in the under-$200,000 revenue range have a single owner. Perhaps CPA practitioners avoid PCAs for the same reason that people fail to purchase life insurance or write a will. This type of planning requires confronting one's own mortality, which makes many people, including professionals, uncomfortable. Nonetheless, CPA leaders who are concerned about the long-term well-being of their practices, clients, and heirs can take steps toward future security by putting PCAs in place. These agreements are contracts that provide for an individual or another CPA firm to assume a CPA practice in the event of another's death, temporary or permanent disability, military leave of absence, or retirement. They are particularly important for sole practitioners, whose practices and clients often rely completely on the CPA's expertise to remain successful, and for small firms. An AICPA-sponsored book by John Eads, CPA, CGMA, Practice Continuation Agreements: A Practice Survival Kit (available at tinyurl.com/lj86vej), provides step-by-step information to help with the preparation of PCAs and is summarized in this article. It's important for CPAs to undertake this kind of planning, according to Eads, a director at Smith, Jackson, Boyer & Bovard PLLC, a large local CPA firm in Dallas, because an accounting practice is more than a business. "It is a professional and personal investment in people--yourself, your family, your staff, and your clients," Eads said. On a couple of occasions when he has been called to help friends in need, William Potter, CPA, J.D., has seen firsthand the unfortunate results when sole practitioners don't have a practice-continuation plan. He was asked to come to an office in crisis on a Monday morning after a CPA in his mid-40s died over a weekend without a practice-continuation plan. The office was in chaos. The employees didn't know who was in charge, and they didn't know what to tell clients. In that situation and another Potter encountered with a CPA who died suddenly, he was able to help arrange for succeeding firms to place bids to buy the late CPAs' practices. But the need to make a deal quickly led to sale prices that weren't favorable to the sellers--the heirs of the sole practitioners who were negotiating while mourning. Note that in this article, value is not meant to be consistent with the conclusions that a CPA Accredited in Business Valuation (ABV) would reach in a formal business valuation performed for litigation or an estate. Instead, value refers to the price to be paid for the practice. "I'm a strong believer that practices ought to meet with other firms they know and have [a PCA] in place so they don't leave it to their family to have to negotiate," said Potter, senior tax director at Postlethwaite & Netterville in Louisiana. "For one thing, the CPA is going to know the value of his or her business better than anybody. In those two instances, it was almost like a fire sale. We interviewed the other CPAs that were coming in to buy it, but we didn't really know the clients. But we knew we had to act fast, or there wouldn't be anything there." Nonetheless, Joel Sinkin, president of CPA succession and merger consultancy Transition Advisors LLC, said a PCA isn't for everybody. He said it's rare for anyone other than a sole practitioner to have a PCA, because CPAs in multiple-partner firms have colleagues who can manage the practice in the event that one partner dies or becomes disabled. …