Next Chapter: Types of Practice Continuation
Ask yourself the following question: What will my spouse or immediate heirs do with my practice if I die or become disabled?
Would your spouse or children be able to take over the management of your practice? What would become of all your hard work and effort with your practice and clients? How can you preserve the value of your professional accounting practice, which may be the largest asset in your estate?
In the event of death or temporary or permanent disability, a practice continuation agreement helps protect your practice, the business interests of your clients, and the financial interests of you and your family. It can also be used as a vehicle for retirement.
A practice continuation agreement is a contract that provides for the assumption of your practice by another CPA firm or individual under a predetermined plan for payment based on its value. In the event of death or permanent disability, your practice will be transferred to another firm or individual. In the event of a short-term disability, your clients will be temporarily serviced by the same CPA firm or individual at a predetermined fee structure.
Preparing a practice continuation agreement requires time and effort, but it is well worth the investment. Because of the significant impact it can have on his or her estate, a practice continuation agreement should be a part of every sole practitioner's personal financial plan. Moreover, it can provide important benefits to a two-practitioner partnership by providing relief in the event of a mutual disaster. Ideally, a practice continuation agreement should be drawn up when you establish your practice. An unexpected event can occur at any time, and you may not have an opportunity to put your affairs in order. In other words, do it now!
A practice continuation agreement is a practice's survival kit.