[AnotherCPA]

Hello everyone! I just need to ask forum’s opinion on my current career situation and how to proceed. I am a CPA licensed in Alabama and currently working part-time for another CPA – just two people firm – me and another CPA. I’m paid $30 an hour and working approximately 15-20 hours a week, will be less after the tax season. Another plus is (or was) is that I always had few bookkeeping clients on the side and maybe 5 tax returns or so during tax season. She always would let me use Quickbooks and Drake to do bookkeeping and tax returns. I’ve been working for her through college and my CPA adventure – around total of eight years. Last month I received my CPA license and my employer told me that I can start working on building up my clients and when I have “enough” we can combine. BUT yesterday she told me she wants me to pay percentage of the firm’s overhead asap like rent, software, fax, phones, liability insurance etc. because I’m doing bookkeeping on the side. (I’m making maybe 6,000 a year on the side).I’m really confused why would she want me for example to pay rent if I don’t bring my clients in the office? Or her phones and emails, some software she uses I don’t use any of that stuff. My question is – should I just leave her and do everything on my own? I feel like she’s got a bargain $30 an hour and she wants me to be available every day to login to work from home as needed (she texts me). Is $30 an hour sufficient compensation for a CPA? Any thoughts and suggestions are welcome! Thank you 🙏

[Recked]

So this is an interesting prospect.
It sounds like she's offering for you to basically be self-employed with your own clients/book of business, and cover a % of expenses.
It might work out cheaper for you to be on your own, or it might not, presumably it makes more sense to share overhead to some degree.
Is she asking you to cover half the overhead now? or just a percentage based on what you're producing?
$30 is sort of ok, it's not great by any means, but the opportunity to build your own book carries a significant value as well.
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So my words of caution for you. You need to sit down and talk, hash out the details, and get everything in writing.
This could easily turn into a mess with your current employer claiming that you were building your book under her name, and therefore those clients are the firms clients and not your clients, and attempting to prevent you from taking them when you leave.
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Sit down and develop a business plan with anticipated revenues and anticipated expenses.
Compare your business model and planned growth, with the expenses she is expecting you to cover up front.
If you're being brought on as a partner, or being groomed to be a partner, then you would no longer need to be available at her request, unless you are still working hourly for her.
It doesn't sound like you have established yourself enough to just venture out on your own, unless you still live at home or have financial backing of some sort.
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Give me some more details on the numbers and terms of the deal. This area interests me a great deal and I'd love to offer any advice I can.

[AnotherCPA]

Recked, thank you for your insight. She wants me to cover percentage based on what I am producing. But even at this point it is cheaper for me to purchase my own software and work by myself. I work from home and I can do everything for my clients remotely so I don't need an office at this point. Also she proposed for me to stay as W-2 employee at $30 an hour working on her clients. (expenses split but not firm's revenue. I just keep what I am bringing from my clients). She also will be retiring in 10 years and suggested to sell the firm/her clients to me. What would be considered a “fair” split in a partnership if she brings a client and I do all the work if I were to propose firms' revenue split? I'm just wondering if this is all worth? I am married and my husband pays the bills so I am considering what would be beneficial/profitable for me long-term, not holding on to the job… Thanks again!!

[Recked]

So the next question is going to be, is she accepting new clients, or would she be passing new clients along to you so you can grow your book of business?
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I think comparing your software and overhead needs in the NOW is being very short sighted for you.
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I don't think you currently have a good grasp or understanding of exactly what is being offered to you, so I would suggest you get her to outline (in writing if possible) exactly what she is proposing. A revenue share based on gross is incredibly favorable to you to help you grow your book of business while keeping overhead some what affordable. It seem like a very kind gesture on her part. But on the flip side, if you continue to work for her, allowing her to grow her business and take on more new clients, while you do the work, you are just enabling her to create a larger firm that she will expect you to buy from her in 10 years when she wants to retire. In 10 years you presumably will have already built a decent book for yourself, so you would be forced to hire and train staff to take over the workload, so you can continue to service the same volume of clients to earn enough to “buy her out”.
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You are currently on a similar path to where I thought I was 10 years ago. I did not get anything in writing and I'm now left in a position where I am starting my own venture while working for my employer full time. Whatever you do, make sure you get this all in writing.
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So your home work. Get a better grasp from her on what is being offered to you, how it will work if you agree to a % of overhead. You have only outlined the drawbacks to you, being the expense, but there must be an upside that hasn't been outlined yet.
Work up a business model with and without taking this opportunity. Put some real numbers to both scenarios.
Get something in writing from her that outlines what she is thinking this will look like in 1, 5 and 10 years.
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Typical firm overhead for a small firm or sole prop is about 30%. Typical firms sell for about 100% of gross (dollar for dollar) to an outside party, and they average 75-80cents on the dollar for an internal acquisition (which you would be at the end of 10 years i assume). If the total overhead is 30% and you can work out a overhead sharing plan for the fixed costs, it can help make you more profitable in the long run. Obviously the lower the volume, the lower the expenses TO A POINT. You'll eventually reach a threshold where you need phones, internet, office space to meet clients, etc. At that point you'll end up being over 30% overhead until your gross reaches the point where your fixed costs + variable work out to be back in the sweet spot range.
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Does your experience and skill set warrant you running your own firm at this point? Are you ready to make the leap?
You don't want to end up being a CPA/glorified bookkeeper. Do you have the skill set and knowledge base to service more advanced tax clients? Are you preparing returns soup to nuts or is your work still being reviewed? How often do you have to ask questions while working on a new tax return? Have you checked the market for other soon to be retiring CPAs in your area? Have you research what firms are currently listed for sale, and for how much in your area? You need to do a ton more research before you can determine if this is a good deal or not, and if you are being offered something that is valuable to you… and furthermore, is it even something you want?

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