Whether non-CPAs should be permitted to have ownership interests in CPA firms.
Rule 505 of the AICPA Code of Professional Conduct allows AICPA members to practice in forms of organization permitted by state law whose characteristics conform to resolutions of AICPA Council. In May 1994, Council approved a resolution allowing firms to include non-CPA owners. The AICPA/NASBA Joint Committee on Regulation of the Profession reviewed this issue and in its final report recommended that all entities that wish to call themselves CPA firms or use the designation CPAs in conjunction with their entity name must be owned by a simple majority of CPAs. The AICPA Council adopted the report in May 1997. This language was included in the Uniform Accountancy Act (UAA) as Section 7(c).
Importance to CPAs
There are legitimate professional reasons for CPA firms to have non-CPA owners. For instance, individuals are needed to perform related professional services and provide specialized expertise on complex audits. Firms have had non-CPA owners for decades without any demonstrated harm to the public. Also, some firms have created additional subsidiaries to accommodate the involvement of non-CPAs. In this case, the CPAs and non-CPAs own the business and work together. The CPAs do not use their title in this business, but in most communities it is widely known they are CPAs.
The AICPA supports non-CPA ownership of CPA firms. The UAA section provides that:
- Licensed CPAs must hold a simple majority of the ownership;
- A licensed CPA or CPA with practice privileges must be responsible for registration of the firm;
- Passive ownership is not permitted;
- The partner/owner in charge of attest services must be a licensed CPA or CPA with practice privileges; and
- All non-CPA owners must be actively engaged in working for the firm, or an affiliated entity;
Under the UAA provision, unless the firm complies with the ownership requirement, it cannot obtain a license. Only a licensed CPA firm may perform attest services and call itself a CPA firm.
Currently, 49 states and jurisdictions have the UAA simple majority provision in place. They are: AL, AK, AR, AZ, CA, CO, CT, DC, FL, GA, GU, IA, ID, IL, IN, KS, KY, LA, MA, MD, ME, MI, MN, MO, MS, MT, NC, NE, ND, NH, NJ, NM, NV, OH, OK, OR, PA, PR, RI, SD, TN, TX, UT, VA, VT, WA, WI, WV, and WY. The state of SC allows for non-CPA ownership, but a 2/3 CPA ownership is required. There are 5 states and jurisdictions that currently do not allow for non-CPA ownership. They are: CNMI, DE, HI, NY, and USVI.
States and jurisdictions that do not allow non-CPA ownership are:
- Commonwealth of Northern Mariana Islands - Statute and rules do not reflect information about non-CPA ownership.
- Delaware - If individuals or shareholders in a CPA firm hold themselves out as a CPA then the ownership of the firm must be 100% owned by the licensed individual shareholders within the firm (Delaware license only) and shareholder (Delaware license only) within the firm.
- Hawaii - If individuals or shareholders in a CPA firm hold themselves out as a CPA or PA then the ownership of the firm must be 100% owned by the licensed individuals (Hawaii license only) and shareholders (Hawaii license only) within the firm.
- New York - Statute and rules reflect if individuals or shareholders in a CPA firm hold themselves out as a CPA then the ownership of the firm must be 100% owned by the licensed individuals shareholders within the firm.
- U.S. Virgin Islands - Statute and rules do not reflect information about non-CPA ownership.
AICPA Staff Contact
Virgil Webb, General Counsel and Trial Board, 202.434.9222
UAA State Non-CPA Ownership Provisions