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Why Small Business Owners Should Work With a Certified Public Accountant

As a small business owner, navigating the complex world of taxes, financial management, and compliance can be overwhelming. To ensure that you ultimately reach your financial goals, it is crucial to partner with a qualified professional who can guide you for years to come. Certified Public Accountants (CPAs) are financial experts with specialized knowledge and experience in tax laws, accounting principles, and business consulting.

Here, we'll explore why small business owners should work with a CPA, how these professionals differ from other tax preparers, what qualifications to look for when hiring an accountant, and how your business's legal structure affects the tax filing process.

Why Small Businesses Need CPAs

A CPA is a highly trained, licensed financial professional who provides comprehensive accounting services to individuals and businesses. Different CPAs can have different niches in which they specialize but they have all gone through similar academic training.

As a profession, their expertise extends far beyond tax preparation -- CPAs are strategic advisors who can help small business owners navigate a wide range of financial challenges, increasing profits. Some key things a CPA can do for a small business are:

Tax Planning and Compliance: CPAs have an in-depth understanding of ever-changing tax laws and regulations at both the federal and state levels. They can help you develop tax strategies that minimize liabilities while ensuring compliance with all relevant tax codes.

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Credit: Cavan Images/Getty Images

Financial Analysis and Reporting: CPAs can analyze your company's financial data, provide valuable insights, and prepare accurate financial statements that reflect the true health of your business. These reports can help you make the right decisions moving forward.

Business Advisory Services: CPAs often serve as trusted advisors to their clients, offering guidance on financial decisions, budgeting, cash flow management, and business planning.

Audit Representation: In the event of an IRS audit or state tax examination, CPAs can represent your business and navigate the complexities of the auditing process. Tax trouble can be scary, and having a trusted CPA in your corner can greatly reduce stress.

The Difference Between a CPA and Other Tax Preparers

A general tax preparer typically works with clients once a year, at tax time. CPAs, on the other hand, typically work with their clients year-round on a variety of tasks, including tax planning, business strategy, and monthly accounting. 

Professionally, CPAs differ from general tax preparers in other ways as well. You'll learn more about these distinctions below:

Education and Licensing: CPAs are required to meet strict educational and licensing requirements, including passing the Uniform CPA Examination. This rigorous process ensures that they possess comprehensive knowledge in accounting, auditing, and taxation.

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Credit: Krisanapong Detraphiphat/Getty Images

Continuing Professional Education: To maintain a CPA license, professionals must participate in ongoing professional education, keeping them up-to-date with the latest tax laws and financial trends.

Expertise Beyond Tax Filing: CPAs are equipped to handle complex financial challenges beyond tax filing. They can provide valuable insights into financial planning, investment strategies, and long-term business growth.

Ethical Standards: CPAs are bound by a strict code of ethics, emphasizing integrity, objectivity, and confidentiality. This commitment ensures that your financial information remains secure and that your best interests are always prioritized.

Qualifications to Look For When Hiring an Accountant

When you start the search for a CPA to assist your small business, consider the following criteria:

Certification: Ensure that the accountant holds a valid CPA license. You should be able to search for this information online. Most CPAs will also display their licenses in their offices if they maintain physical locations. Those who operate remotely may have details about licensure on their websites.

Experience: Look for an accountant whose experience aligns with your firm's niche. If, for example, you specialize in working with restaurant owners, choose an accountant who knows about the unique tax and financial challenges that come with working in the food service industry.

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Credit: Hispanolistic/Getty Images

Communication Skills: Choose a CPA who explains complex financial concepts in a clear and understandable manner, fostering effective communication and collaboration. The easier it is for you to communicate with your accountant, the less problems you are likely to encounter with your company's finances.

Service Packages: Different CPA firms have different service packages. If you are on a tight budget, for example, you might be interested in a firm that has a la carte pricing, so you can just pay for the services you need. If, however, cost is not a major concern for you, a firm that provides full-service packages for a monthly flat rate might be the best option. 

The legal structure of your small business can significantly impact your tax obligations and financial planning. Choosing the right business entity is, in fact, one of the most important things your CPA can help you with, especially if you are launching a new small business. 

Below, you will learn more about some of the business entity options you can choose from in the United States:

Sole Proprietorship: As a sole proprietor, you and your business are considered the same entity for tax purposes. While this structure offers simplicity, you are personally responsible for all business liabilities.

General Partnership: In a partnership, each partner reports their share of business income and expenses on their personal tax return. A CPA can help navigate the complexities of partnership taxation.

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Credit: Maskot/Getty Images

Limited Liability Company (LLC): An LLC provides personal liability protection and flexibility in tax treatment, allowing owners decide if they want to be taxed as a partnership or a corporation based on their situations.

Corporation: A corporation is a separate legal entity from any individual involved in its operations, and its profits and losses are taxed at the corporate level. CPAs can guide corporations in optimizing their tax strategies and complying with corporate tax regulations.

Enlisting the services of a Certified Public Accountant is a smart move for any small business owner seeking financial expertise and strategic guidance. A CPA's comprehensive knowledge of tax laws, financial analysis, and business advisory services can help you make informed decisions, minimize tax liabilities, and ensure long-term financial success.

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Rebekah Barton

Rebekah Barton

Rebekah's search engine optimization career began completely by accident as a college student. Over the course of her career so far, she has "grown up" with the SEO industry, from writing content while juggling classes to managing her own teams of writers and overseeing SEO strategy in subsequent roles. She is excited to bring her passion for high-quality content to CountingWorks, Inc.

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