Non-CPA Ownership of CPA Firms is Finally Here- December 12, 2023

How Does This New Bill Affect Your CPA Firm?

After much anticipation, on December 8, 2023, Governor Kathy Hochul finally signed Bill Number S2473A into law which allows non-CPAs to become minority owners of CPA firms. The proposal was first presented by the NYSSCPA and was approved by the New York State Assembly and the Senate over 7 months ago. This legislation amends the NYS education law with regard to the ownership of certified public accounting firms. New York was one of the last states in the country to adopt such a change.

The Bill amends the applicable sections of the business corporation law, the partnership law, and the limited liability company law to authorize non-CPA ownership of a firm, subject to a number of requirements. Those requirements are as follows

1.   Licensed CPAs must hold a simple majority of the ownership;

2.   A licensed CPA must be in charge of all attest services;

3.   All non-CPA owners must be actively engaged in working for the firm or an affiliated entity;

4.   Passive ownership is not permitted;

5.   A majority of the directors and officers of the firm must be CPAs; and

6.   The president, chairperson of the Board, and CEO, must all be CPAs.

The legislation provides a significant benefit to New York CPA firms. As many of you know, non-licensed professionals have always been critically important to the success and effectiveness of a CPA practice. This legislation now allows your firm to provide an individual with long-term incentive and growth opportunities regardless of licensing status, making the succession of your accounting practice more efficient, giving you more opportunities for sales or transfers. Firms may also be incentivized to acquire other accounting firms given the reduced restrictions. This all comes at a time when the CPA community is facing great pressure with decreasing numbers of candidates taking the CPA exam and many young individuals choosing other career paths. Allowing qualified professionals to obtain ownership in a firm without the requirement of CPA licensing will likely expand the opportunities that firms have to find talented individuals.

The legislation should have a significant impact on you and your colleagues as it presents new opportunities for business growth and succession. Our tax and business transaction attorneys at Katz Chwat, P.C. can help assist you with this ever-changing legal environment. Please feel free to contact us with any questions you may have.