If you’ve been wondering whether you need an accountant (or a lawyer or a financial planner) or how you get one, great news! I’ve written you a FAQ-style booklet on what kinds of professional help you can hire, how to find one, how to assess whether you’ve found the right one, and when to proactively consult the one you eventually hire.
Would you like a sample before you add to your to-be-read pile? Here’s the first section of the booklet:
What kinds of professional help can I hire for my small business?
LAWYERS
Lawyers can draft and review business documents such as contracts with landlords, vendors, and contractors as well as business formation documents and operating agreements. They’re familiar with the Uniform Commercial Code (UCC), which is a set of business laws adopted by all US states. They can help you understand how to operate your business within the law. They can also help you pursue a business dispute in the civil court system.
Lawyers are regulated by state bar associations. Any attorney you hire should be a member in good standing of the bar in the state where the lawyer is in business and should have rights to appear in courts in the state where you do business. Requirements vary by state, but admission to the state bar generally requires 6+ years of college, passing the bar exam (two days of testing), and a character assessment process. Maintaining bar membership requires staying out of legal trouble, complying with a code of ethics and professional conduct, and completing Continuing Professional Education (CPE). In Oregon, bar membership requires an average of 30 hours a year of CPE.
ACCOUNTANTS
Accountants come in many flavors.
Bookkeepers record business transactions and can help you prepare invoices, keep track of business bills that need to be paid, and assist with payroll for employees. There are no standard qualifications for bookkeepers.
Tax preparers are regulated by states and the Internal Revenue Service (IRS). Anyone with $40 and 15 minutes can sign up to be a paid tax preparer with the IRS. However, in order to represent you in a dispute with the IRS, your tax preparer must be a lawyer, Enrolled Agent or Certified Public Accountant.
Enrolled Agents (EAs) are regulated by the IRS and may also need to register with states to represent you in state taxing authority disputes. EAs must pass 10.5 hours of exams on tax knowledge and must complete an average of 24 hours a year of CPE to stay enrolled. There is no education requirement or ethics/code of conduct for EAs. Some states, including Oregon, have ethics requirements for EAs who become licensed tax consultants in that state.
Certified Public Accountants (CPAs) primarily work in either assurance or tax. CPAs in assurance provide a variety of services to ensure that medium and large companies have financial statements that are not misleading and that are presented consistently with accounting standards. The most common kinds of assurance services are reviews and audits, which are typically required by business lenders and government regulators. CPAs in tax serve all sizes of businesses with the goal of making sure you are in compliance with all applicable tax rules while also making sure you’re getting the benefit of all the deductions and tax credits your business is eligible for. Tax is a constantly changing landscape with Congress, states, and cities passing new rules (often retroactively), and the IRS and courts offering clarifications and new decisions throughout the year.
CPAs are regulated by state boards of accountancy. Any CPA you hire should have an active license in the state where the CPA’s business is and experience with clients in the city and state where your business is located. Requirements vary by state, but in general obtaining a CPA license requires 5 years of college, passing the Uniform CPA Exam (16 hours of testing), and at least a year of work supervised by an experienced CPA. Maintaining a CPA license requires staying in compliance with tax filings, staying out of legal trouble, complying with a code of conduct and ethics, and an average of 40 hours a year of continuing professional education.
FINANCIAL PLANNERS
Financial planners help you make sense of your current financial situation, articulate your financial goals, and take steps to get from where you are to where you want
to be. They’re especially skilled at helping you plan for retirement, and at helping make sure you have the right paperwork in place for your finances to stay orderly should you die or become incapacitated. Some are also skilled in helping you learn to better manage your money day-to-day, and in helping you address debt and credit score problems. You do not need to have a lot of money to benefit from working with a financial planner; if you do have a lot of money, you likely want to work with a financial planner who is also an investment advisor.
Financial planners come with an alphabet soup of potential letters after their names. Forbes has a handy round-up of these here: https://www.forbes.com/advisor/ investing/financial-advisor-certifications/. In general, financial planners are subject to one of two basic ethical frameworks in recommending investments. The suitability standard requires that their recommendations be reasonable in amount, risk, and time horizon for returns based on your age and financial situation. The fiduciary standard requires that, on TOP of being suitable, the recommendation favors your interests over the planner/advisor’s interests. Someone acting as a fiduciary is not allowed to take into account their potential commission in deciding what investments to recommend to you; someone acting on the suitability standard IS allowed to consider their commission. Some advisors are dual-licensed as both brokers and advisors and are subject to different standards depending on which role they are fulfilling. They are NOT required to disclose in which capacity they are acting, so it’s always worth asking!
Financial planners charge for their services in a wide variety of ways. Like lawyers and accountants, they may charge by the hour. Financial planners are more likely than accountants and lawyers to have a project minimum fee. In addition, financial planners who are also investment advisors may calculate some of their fee as a percentage of Assets Under Management (AUM). For example, if your advisor manages $100,000 and their fee is 1% of AUM, your annual fee would be $1,000. Financial planners can be fee-based which means they primarily make money from what you pay them directly, but may also earn commissions for recommending specific investment or insurance products. They can also be fee-only, which is exactly what it sounds like; they only make money from the fees their clients pay.
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