Questions to Ask a CPA When Starting a Business
Questions for a first meeting with a CPA when you are starting a business. They cover entity structure, fees and scope, bookkeeping, estimated payments, hiring, sales tax and what the CPA needs from you each month.
The questions
Open any question for the note
What kind of businesses do you usually work with, and how many are around my size?
Why ask it
A firm built around 200 person companies will not prioritise you, and one that has never seen your industry will miss things. Ask for two client examples at roughly your scale.
How do you charge: hourly, monthly, or per return? What does that include?
Why ask it
Fee structure shapes your behaviour. Hourly billing quietly discourages you from calling with the small questions, which are usually the cheapest ones to answer early.
Who will I be dealing with day to day, you or someone on your team?
Why ask it
Many firms sell you the partner and then staff the work to a junior. That can be perfectly fine, but you should meet that person and know how a question gets escalated.
Given what I have told you, which entity structure would you set up and why?
Why ask it
The reasoning is what you are buying, not the answer. A recommendation made without asking about your revenue, partners, state and plans is a template rather than advice.
What would change your recommendation on structure in a year or two?
Why ask it
Good advisers set review triggers: a revenue threshold, taking on a partner, hiring, raising money. Someone who treats the structure as permanent does not intend to revisit it with you.
What would an S corporation election actually get me, and when is it too early?
Why ask it
A common source of both real savings and expensive mistakes. Listen for whether they tie it to your profit level and a defensible salary rather than presenting it as free money.
Which bookkeeping setup do you want me on, and will you work in it with me?
Why ask it
You want a system they can see into, because a CPA reconstructing a year from bank statements is the most expensive way to buy accounting. Ask whether access to your books is billed.
How do you want me to separate business and personal money from day one?
Why ask it
Mixed accounts are the most common mess in a first year, and untangling them costs far more than a separate account would have. Ask what they want in place before your first transaction.
What is the calendar of filings and payments I am now responsible for?
Why ask it
You are asking for a dated list, not a description. If you leave without actual deadlines written down, you will meet them by accident or not at all.
How do we work out my estimated payments in a first year with no history?
Why ask it
First year estimates are genuinely uncertain, and a useful answer explains the method and any safe harbour available to you. Anyone quoting a confident figure without your projections is guessing.
What should I set aside for tax out of every dollar that comes in?
Why ask it
A working rule of thumb you can apply weekly beats a precise annual number you will forget. Ask what assumptions it rests on, so you know when revenue changes enough to revisit it.
Where do people in my industry most often get this wrong?
Why ask it
Every sector has recurring traps, whether contractor classification, inventory, tips or multi state sales. A CPA who works in your field answers immediately and with specifics.
How should I handle the first person I pay: employee or contractor?
Why ask it
Misclassification is expensive and applies retroactively. A careful, fact based answer about control and independence is a better sign than an assurance that everyone in your field uses contractors.
Do I have a sales tax obligation, and does that change if I sell into other states?
Why ask it
Sales tax turns on where your customers are and what you sell, and the answer is often more involved than expected. If they wave it away without asking what you sell, ask again.
Which expenses do you expect me to document more carefully than I probably will?
Why ask it
This gets you the practical list, usually mileage, meals, home office and anything with a personal element. Far better to hear it in month one than to reconstruct it later under examination.
What records do I need to keep, in what form, and for how long?
Why ask it
Retention periods vary by document type and jurisdiction, and format matters as much as duration. Ask specifically whether photographs of receipts are acceptable to them.
How do I take money out of the business, and what does that do to my tax bill?
Why ask it
Draws, salary and distributions are treated differently, and getting it wrong is both common and costly. Ask them to walk through the mechanics of paying yourself rather than the theory.
If I buy equipment or a vehicle this year, how do you want me to think about it?
Why ask it
Timing and treatment of asset purchases can move your bill materially, so a good adviser wants to hear about it before you buy. If the answer is only to send the receipt, push for more.
If I get a notice from the tax authority, what do I do and what do you do?
Why ask it
Notices are routine and largely procedural, and panic causes more damage than the notice does. You want a named process, a response window, and clarity on whether replying for you is billed extra.
What do you need from me each month or quarter to do your job properly?
Why ask it
The most revealing question of the set, because it shows whether the relationship is built to work. A CPA who needs nothing from you until March will react to your year rather than help you plan it.
Working with a CPA in Year One
Practical guidance for the conversation itself
Go to the first meeting with numbers
A CPA can only give specific advice if you bring specifics. Arrive with your expected revenue for the next twelve months, your major planned costs, whether anyone else owns part of the business, which states you will sell into, and whether you expect to hire. Without those, anything you hear about entity structure or estimated tax is a general description of the options rather than advice about your situation.
Questions they should be asking you
- What the business actually does, and how it makes money.
- Expected revenue and profit for the first year or two.
- Whether there are other owners, and on what terms.
- Where you are located and where your customers are.
- Whether you plan to hire, and roughly when.
- Whether you intend to raise outside money or sell the business eventually.
- If a structure is recommended without most of these being asked, you are getting a default rather than a recommendation.
Set the relationship up properly
- 1Get the engagement letter in writing, including what is in scope, what is billed separately and how often you will speak.
- 2Agree the bookkeeping arrangement before you start trading, including who does the monthly reconciliation.
- 3Open a separate business bank account and route everything through it from the first transaction.
- 4Put every filing date they give you into a calendar with a reminder two weeks ahead.
- 5Schedule a mid year check in rather than meeting only at filing time, since very little can be fixed in the spring.
What a CPA is not
- Not a lawyer. Formation documents, partnership agreements and liability questions belong with an attorney, even where the CPA has a view.
- Not a substitute for bookkeeping. Most firms will do it, but at a higher rate than a bookkeeper, and reconstruction after the fact costs the most of all.
- Not protection against an audit. Ask what representation costs if one happens rather than assuming it is included.
- Not a source of certainty in every state. If you will operate across state lines, ask directly whether they handle that or refer it out.
Before you sign
- Verify the licence with your state board of accountancy. A paid tax preparer is not necessarily a CPA.
- Ask how many clients they take on and what their response time looks like during filing season.
- Ask what happens if you leave: who holds the working papers, and how your records transfer.
- Ask for a fixed quote covering the first year of compliance work, so you can compare firms on the same basis.