Starting a tax practice: are you ready to hang a shingle?

• Author: Crisler, Michael W.

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CPAs looking to launch their own tax practice should develop a plan that considers their market, licensing requirements, financing, insurance needs, and other factors before making the leap.

Another busy season has just come to an end, and most tax practitioners will confess to putting in excruciatingly long hours at the office. Family and friends frequently reach out soon after April IS (or April 18 this year) to make sure the CPA in their life is not a figment of their imagination. And when CPAs open their now-vacant calendar to schedule some much needed catch-up time with these important people, they may pause and think, "Wow, there must be more than this."

The good news for tax professionals is that the opportunity does exist to make the public practice experience exactly what they desire. They should not be misled; what this column discusses requires a commitment to long hours and consistent, hard work, but the rewards can be tremendous--the opportunity to venture out and start their own tax practice.

When deciding whether this is a route worth exploring further, CPAs must consider a number of factors.

This column provides two experienced CPAs' overview of some of these key factors, as both of the authors have been down this road--a road filled with joy and some pain, but culminating in an overall sense of satisfaction and accomplishment.

Find the Motivation Factor

It is no secret that most tax practitioners suffer from exhaustion on the heels of tax season. As the adrenaline rush present in the early weeks wanes, tax practice becomes more about getting through the remaining days. The decision to start a tax practice should not be entered into lightly and not merely be a response to current working conditions.

Take a break, catch up with friends and family, and think deeply about why this might be the right career move.

Is the motivation to run away from something that feels bad now, or toward something that is strongly desired for the future? If the answer is not clear, ask these questions to help gain clarity:

* Is this a reaction to current circumstances?

* What is the primary reason for wanting to move forward?

* Is this feasible, based on existing financial means?

* Is a support system in place to help with the transition?

* Are the necessary skills to run a business present?

These questions are not intended to discourage the idea, but all of these important questions have to be answered before moving forward with a plan to start a tax practice. If the answer to one or more of the questions indicates a lack of readiness, it just means those issues must be addressed in a plan. Now may not be the right time to move forward. Perhaps sometime in the future may be more favorable.

Creating a Plan

Many more questions must be addressed. How will the practice be established? How much seed capital is needed? Where will the office be located? Is an office even required?

What hardware and software tools will be necessary?

Regardless of the "why" for venturing out, creating a solid plan is a must. The form and content of the plan may vary greatly--from an exhaustive formal business plan to a bulleted list of key points scribbled on a napkin...