Under Business and Professions Code sections 5035 and 5050(a), accountancy corporations must be licensed much in the same manner as an individual practicing public accountancy. Specifically:
5035. “Person” includes individual, partnership, firm, association, limited liability company, or corporation, unless otherwise provided.
5050. (a) Except as provided in subdivisions (b) and (c) of this section, in subdivision (a) of Section 5054, and in Section 5096.12, no person shall engage in the practice of public accountancy in this state unless the person is the holder of a valid permit to practice public accountancy issued by the board or a holder of a practice privilege pursuant to Article 5.1 (commencing with Section 5096).
The California Board of Accountancy regularly pursues enforcement against corporations practicing without a separate license. This can lead to fines in the thousands of dollars and restrictions on your ability to practice.
If you are unsure if you are in compliance, please visit the Board’s website and view the available Accountancy Corporation Check Sheet, which outlines the requirements for completing the Application for Licensure as an Accountancy Corporation, as well as a copy of the application itself. The Accountancy Corporation Check Sheet includes the following items.
- Fees for Licensure – The application and initial licensee fees are $270.
- Appropriate Use of Corporate Name – It is inappropriate to practice accountancy under any name containing the word “corporation”, “inc.”, etc. until the corporation is properly licensed. To do so can be grounds for discipline by the Board of your individual license.
- Copy of the Articles of Incorporation – If they are no longer in your possession, copies of your articles and all amendments are available from the California Secretary of State. Their document request form is available at their website. Their current estimated processing time is ten (10) days for hand delivered requests.
- Copy of the Corporate Bylaws – It is important that an attorney review a copy of your corporate bylaws to ensure that they are in compliance with all current statutes and regulations governing professional corporations.
- Shareholders, Directors, and Officers – Each director, shareholder, and officer of an accountancy corporation must hold a valid license to practice public accountancy.
- Out-of-State Shareholders – I do not believe this section is relevant in your case, however please let our office know right away if I am mistaken.
- Nonlicensee Owners – Again, I do not believe this applies here. However, please contact our office if you believe it to be relevant.
- Shareholder Security for Claims Against Corporation Agreement – Accountancy corporations must comply with California Code of Regulations, California Code of Regulations, Title 16, Section 75.8, which reads as follows:
a) An accountancy corporation shall provide and maintain adequate security for claims against it by its clients arising out of the rendering of or failure to render professional services. Security for such claims shall consist of either of the following:
(1) Insurance for each claim in an amount equal to at least $100,000 per licensee, provided that the maximum amount for each claim shall not be required to exceed $1,000,000, and that the minimum amount guaranteed for all claims during any one calendar year shall be at least an amount equal to $250,000 per licensee, provided that the maximum amount shall not be required to exceed $3,000,000; or
(2) A written agreement of the shareholders that they shall jointly and severally guarantee payment by the corporation of liabilities to its clients arising out of the rendering of a failure to render professional services.
(b) In the event of failure to comply with the requirements of this section, each and every shareholder of the corporation shall be deemed to have agreed to be jointly and severally liable for claims against the corporation by its clients arising out of the rendering of, or failure to render, professional services.
According to the Board, the current processing time for complete applications with not issues is four to six (4-6) weeks once they are received by the Board. For most hopeful licensees, it will be helpful to work with an insurance broker and attorney to determine which method of compliance is appropriate for your business.