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These are frequently asked questions about CPA Firms:  
  What is the definition of the Practice of Accounting?
What is Public Accounting?
Do I need to be registered as a firm if I only offer tax services?
What are the requirements to operate as a CPA firm in Arizona?
How do I know what type of business organization to form for my firm?
Do I need to use the ‘professional’ designation in my firm’s title?
How are Arizona CPA firms impacted by peer review?
What happens if a partner leaves? Do we have to change the firm name?
How often does my firm's license renew?
How much does it cost to renew my firm's registration?
How do I cancel my firm’s license?		  
   
 What is the definition of the Practice of Accounting?  
  Practice of Accounting is defined in A.R.S. § 32-701(11) as providing any accounting services, including:
  • Recording and summarizing financial transactions
  • Analyzing and verifying financial information
  • Examining, reviewing and reporting on financial statements
  • Reporting financial results to an employer, client or other parties
  • Rendering attestation, tax and management advisory services to an employer, client or other parties
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 What is Public Accounting?  
  When a CPA or PA offers any services defined in the practice of accounting to the public, it is considered public accounting. top
   
 Do I need to be registered as a firm if I only offer tax services?  
  Yes. Pursuant to A.A.C. R4-1-455.03(D)(1), any CPA or PA who offers to the public any of the services defined in the practice of accounting can only do so through a firm registered with the Board, even if the CPA/PA is not receiving a fee. top
   
 What are the requirements to operate as a CPA firm in Arizona?  
  Pursuant to A.R.S. §§ 32-731, 32-747.01 and A.A.C. R4-1-455.03(D)(1)
  • CPA's in the State of Arizona may practice public accounting, whether as owners or employees, only through firms registered with the State of Arizona.
  • In order to qualify as a CPA firm in Arizona,
    • At least one partner shall be a resident and a full-time practicing CPA in good standing in Arizona; and
    • At least 51% of the ownership must belong to holders in good standing of CPA certificates or licenses in any state or foreign country.
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 How do I know what type of business organization to form for my firm?  
  Pursuant to A.R.S. §§ 32-731, 32-734 and 32-735, CPA firms can be organized in the following manner:

Type Defined Specifics
Sole Practitioner
(or sole proprietor)
  • Owned by one individual; can also operate as an independent contractor, providing services to other businesses
  • Individual registrant is responsible for all taxes, assets and liabilities of the business
  • No liability umbrella
  • File with the Secretary of State
  • No fee due to Arizona State Board of Accountancy
  • Not the same as a single owner PC, single member LLC or single partner LLP
  • Renews biennially at the same time the registrant renews his/her CPA license
Corporations
  • Organized under the provisions of A.R.S. Title 10 (Corporations and Associations), Chapter 20 (Professional Corporations);
    • An ‘S’ Corp is one in which the profit/loss is passed on to the individual owners, but is not subject to corporate income taxes. Same protection of personal assets as in C Corp.
    • A ‘C’ Corp is a completely separate tax entity from owner; owners are treated as employees of corporation for tax purposes.
  • The business assets and liabilities are separate from owner’s
  • File articles of incorporation with the Arizona Corporation Commission
  • Name of corporation, pursuant to A.R.S. § 10-2215(1), can only use corporate designations of Professional Corporation (PC), Professional Association (PA), Service Corporation (SC), Limited (Ltd) or Chartered (Chtd) --- No Inc's
  • $300 Biennial fee due to Arizona State Board of Accountancy biennially pursuant to A.A.C. R4-1-345(B)(2)
Limited Liability Company (LLC)
  • Organized under the provisions of A.R.S. Title 29, Chapter 4 – Arizona Limited Liability Act;
  • Owners have personal liability shield; only the company can be sued.
  • File articles of organization with the Arizona Corporation Commission
  • $300 Biennial fee due to Arizona State Board of Accountancy
  • Renews biennially pursuant to A.A.C. R4-1-345(B)(2)
Partnerships
  • Organized under the provisions of A.R.S. Title 29, Chapter 5 – Arizona Uniform Partnership Act;
  • In general, all partners are liable jointly and severally for all obligations of the partnership.
  • File with the Secretary of State
  • $300 Biennial fee due to Arizona State Board of Accountancy
  • Renews biennially pursuant to A.A.C. R4-1-345(B)(2)

Please note that, regardless of the number of owners/members/partners, a Professional Corporation (PC), Limited Liability Company/Professional Limited Liability Company (LLC/PLLC), or Limited Liability Partnership (LLP) is not the same as a sole practitioner. Any firm whose organization falls in the category of A.R.S. Title 10 (Corporations and Associations), Chapter 20 (Professional Corporations), or A.R.S. Title 29 (Partnership), Chapters 4 and 5 (AZ Limited Liability Act and Revised Uniform Partnership Act) must register as a firm. For more information on what type of firm organization may be best for you, please see this Business Article. 		top
   
 Do I need to use the ‘professional’ designation in my firm’s title?  
  The use of the professional designation, such as PC (Professional Corporation) or PLLC (Professional Limited Liability Company), means that the service being offered may only lawfully be rendered by a person duly licensed in this state, such as those offered by attorneys and CPAs/PAs. The use of the designation, however, is not required to form a CPA firm; for example, if you are considering forming a limited liability company, you can license the firm as an LLC or as a PLLC, but you are not required to license your firm as a PLLC.

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 How are Arizona CPA firms impacted by peer review?  
  Pursuant to A.A.C. R4-1-454, all firms performing restricted financial services (audits or reviews) or full disclosure compilation services will need to complete a peer review within the three years immediately preceding the firm's registration date. For a further review of the regulation governing peer review, please see the Peer Review link under the Firms tab on this website.

If the firm accepts an engagement, which for the first time will require the firm to complete a peer review, pursuant to A.A.C. R4-1-454(I)(2)(b):
  • The firm agrees to notify the Board within 90 days after accepting a restricted financial services or full-disclosure compilation service;
  • The firm will undergo a peer review within 18 months from the year end of the engagement accepted (for example, if the engagement’s year end is 12/31/08, the firm must undergo a peer review by 6/30/2010).
The Arizona Society of Certified Public Accountants published in their November 2009 AZCPA issue that CPAs will continue to use the current peer review process until the State Board of Accountancy takes action and the law changes.

The Facilitated State Board Access (FSBA) is a new process that will address the demand for greater peer review transparency. This is a program that the American Institute of CPAs (AICPA) has created to help the profession keep up with the evolving changes in the business and regulatory environments. Read more in their Business Article.

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 What happens if a partner leaves? Do we have to change the firm name?  
  Should the firm lose a partner, the firm is not required to change the firm name, pursuant to A.R.S. §32-747(C). The law states a firm is not prohibited from the continuous use of a partnership name, or a modification of the name, by a successor firm formed by the remaining partner(s).

This provision, however, does not negate the limitation on firm names as provided in A.A.C. R4-1-455.03(D)(2), which precludes the use of “and Associates”, “and Company” or “and Consultants” unless the terms refer to additional full-time CPAs that are not otherwise mentioned in the firm name. For further information on firm names and their requirements, please be sure to visit the Firm Name Change page under the Firm tab on this website.

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 How often does my firm's license renew?  
  Pursuant to A.R.S. §32-730, the Board requires every CPA firm to renew its license on a biennial basis. Pursuant to A.A.C. R4-1-345(B)(2), firms initially licensed in an even-numbered year shall register during the month of the initial registration in every even-numbered year. Firms initially licensed an odd-numbered year shall register during the month of the initial registration in every odd-numbered year.

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 How much does it cost to renew my firm's registration?  
  Pursuant to A.A.C. R4-1-345(D), the biennial registration fee for each CPA firm is $300 per registration period. A late fee of $25 will be assessed if the firm's renewal is not received on time. top
     
 How do I cancel my firm’s license?  
  A CPA firm that is no longer actively engaged in the practice of accounting and which does not want to renew the firm’s license may request that the license be canceled by completing the attached Firm Cancellation Order. This Order is a fillable form and requests that specific information be filled in by the signer. All information asked for in the Cancellation Order can be found by reviewing the Firm’s information in the firm section of the CPA Directory, link attached.

A partner of the firm must complete, date, sign and return the Order back to the Board office. The Order will require the Board’s approval before the cancellation is complete. Every blank fillable space must be completed by the signer. Any form submitted to the Board office that is not complete will be returned to the Firm for completion before being accepted for submission to the Board for its approval.

This subsection does not apply if a complaint has been filed with the Board or disciplinary proceedings are pending against the firm.

Firm Cancellation Order Form

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