How to Start a CPA Firm in the USA: Licensing, Costs, and Key Considerations

Introduction

How to start a CPA firm — that’s probably the question that brought you here right?

And if you’re anything like most CPAs when starting an new business, you’re excited… and feel just a little overwhelmed.

You know your stuff — taxes, audits, financials — that’s the easy part.
But turning your CPA license into your own profitable firm? That takes more than just technical know-how.

You’ve got to:

• Navigate licensing and legal requirements
• Think about startup costs and planning
• Set up your own systems, pricing, and client outreach
• And yes — protect your business with solid professional liability insurance

Don’t worry — I’ve got you.
In this guide, I’ll walk you through each step of how to start a CPA firm in the U.S. — in plain English — so you can feel confident building a business that works for you.

Let’s dive in and get this firm off the ground.

What Is a CPA and How Is It Different from Other Accountants?

If you’re exploring how to start a CPA firm, it’s essential to understand what sets a Certified Public Accountant (CPA) apart from other types of accountants in the U.S.

What Is a CPA?

A CPA is a licensed accounting professional who has passed the rigorous Uniform CPA Examination, met education and experience requirements, and is licensed by a state board of accountancy.

To become a CPA in the U.S., you generally must:

• Complete 150 semester hours of college-level education (typically a bachelor’s degree plus additional credits)
• Pass all four sections of the CPA Exam administered by the AICPA
• Fulfill 1–2 years of supervised work experience
• Pass an ethics exam in some states
• Maintain your license with continuing education (CPE)

Once licensed, CPAs are authorized to perform specialized tasks such as auditing financial statements, filing reports with the SEC, and representing clients before the IRS.

📌 Key Authority: Learn more about the CPA credential at the National Association of State Boards of Accountancy (NASBA).

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CPA vs Other Types of Accountants

Here’s how CPAs compare to other common types of accountants in the U.S.:

Designation	Education & Licensing	What They Do	Can They Sign Audits?
CPA	150 credit hours, CPA Exam, state license	Audits, tax filings, financial consulting, SEC reports	✅ Yes
Accountant (Unlicensed)	No formal license required (may have degree)	Bookkeeping, general accounting, tax prep	❌ No
Enrolled Agent (EA)	IRS exam or experience-based	Tax preparation and representation before the IRS	❌ No
CMA (Certified Management Accountant)	Bachelor’s degree + CMA exam	Internal company financial analysis, strategy	❌ No
Bookkeeper	No certification required, optional courses	Recording daily transactions, maintaining ledgers	❌ No

⚖️ Why the Difference Matters

• Only CPAs can perform audits and issue attestation reports required by banks, investors, and regulatory agencies.
• Non-CPAs can offer accounting and tax services, but they cannot legally call themselves CPAs or perform certain tasks reserved for CPAs.
• CPAs are held to higher ethical and professional standards, making them more legally liable—and thus more in need of professional liability insurance for accountants when starting their own firms.

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👉 If you’re considering how to start a CPA firm, knowing the legal authority and responsibilities tied to the CPA license is critical. It directly impacts what services you can offer and the kind of insurance protection you’ll need.

For more details on how to protect your firm, check out our guide:
➡️ How Professional Liability Insurance for CPA Protects Accountants from Costly Lawsuits

Steps on How to Start a CPA Firm in the USA

1. Obtain Your CPA License

To legally offer CPA services, you must obtain a CPA license from your state’s Board of Accountancy.

Requirements typically include:

• A bachelor’s degree with 150 semester hours of education
• Passing the Uniform CPA Examination
• One to two years of relevant work experience under a licensed CPA
• Meeting state-specific ethics exam requirements

For detailed information, visit the NASBA Licensure Information.

2. Choose a Business Structure

Select an appropriate legal structure for your firm, such as:

• Sole Proprietorship
• Limited Liability Company (LLC)
• Professional Corporation (PC)

Each structure has implications for liability, taxation, and regulatory compliance.

3. Register Your Business

Register your firm with the appropriate state authorities, which may include:

• Obtaining an Employer Identification Number (EIN) from the IRS
• Registering with the Secretary of State
• Applying for a Firm Permit or License

Refer to your state’s Board of Accountancy for specific registration requirements.

4. Secure Professional Liability Insurance for Accountants

Professional liability insurance, also known as Errors and Omissions (E&O) insurance, is crucial for protecting your firm against claims of negligence or malpractice. This coverage can help with legal defense costs and settlements.

For more information, see our article on Professional Liability Insurance for Accountants.

5. Set Up Your Office and Technology

Decide whether to operate from a home office or a commercial space.

Invest in essential technology, including:

• Accounting software
• Secure data storage solutions
• Communication tools

Ensure compliance with data protection regulations and maintain client confidentiality.

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Video: What You Need to Know on How to Start a CPA Firm

💰 Estimated Startup Costs

Startup costs for a CPA firm can vary widely based on location, services offered, and business model.

Here’s a general breakdown:

Expense Category	Estimated Cost Range
Licensing and Registration	$500 – $2,000
Office Setup (Home or Rental)	$1,000 – $10,000
Technology and Software	$1,000 – $5,000
Professional Liability Insurance	$600 – $1,200/year
Marketing and Branding	$500 – $3,000
Miscellaneous Expenses	$500 – $2,000
Total Estimated Costs	$4,100 – $23,200

These estimates can fluctuate based on individual circumstances and choices.

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Starting Your Own CPA Firm vs. Working for an Established Firm

Aspect	Starting Your Own CPA Firm	Working for an Established Firm
Income Potential	Potentially higher, but variable and dependent on client acquisition	Steady salary with potential bonuses
Work-Life Balance	Greater flexibility, but may involve longer hours initially	More structured hours, but less flexibility
Decision-Making	Full control over business decisions	Decisions made by management
Job Security	Business success depends on personal effort and market conditions	Generally more stable employment
Professional Growth	Opportunities to diversify services and client base	Access to mentorship and structured training

For a deeper analysis, consider reading Starting a CPA Firm: 7 Key Questions Answered.

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Importance of Professional Liability Insurance for Accountants

Many new CPA firm owners underestimate the necessity of professional liability insurance for accountants, assuming that their expertise will prevent errors. However, even minor mistakes or misunderstandings can lead to significant legal claims.

Common Reasons for Overlooking Insurance:

• Belief that errors are unlikely
• Desire to minimize startup costs
• Misunderstanding of coverage benefits

Potential Consequences:

• Out-of-pocket legal expenses
• Damage to professional reputation
• Financial strain or bankruptcy

For comprehensive coverage options, explore Professional Liability Insurance for CPAs.

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Conclusion

By now you should know enough about how to start a CPA firm to be able to take action. Establishing a CPA firm in the USA involves meticulous planning, adherence to licensing requirements, and strategic financial management. While the journey presents challenges, it also offers the opportunity for professional independence and growth.

Prioritizing essential elements such as proper licensing, adequate insurance coverage, and sound business practices will lay the foundation for a successful CPA firm. We hope this guide has given you clarity on how to start a CPA firm in the US and wish success on your journey.

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For more insights on professional liability insurance for CPA, read our article on How Professional Liability Insurance for CPA Protects Accountants from Costly Lawsuits.