Selling an accounting practice in California runs on a calendar fixed by one rule. Under 16 CCR 54.3 no client’s records may go to the buyer until the client consents or 90 days pass after a written notice, so a seller who wants the buyer working the files before the filing season signs in September and mails the notice within a week. Counting back from that date, months 24 to 12 are for the items that set the price: a second reviewer so you are not on every return, no client above a quarter of fees, a signed engagement letter for every client, clean books and three years of fees by client. Months 12 to 0 are the diligence file, a written NDA before any client information changes hands (Business and Professions Code 5063.3), and a purchase agreement that fixes the price, the holdback, the Form 8594 allocation and the staff offers. After closing the clocks are short: the EDD final return within 10 days, the IRS e-file office closed within 30 days while the buyer applies for its own EFIN, the Board of Accountancy told of ownership changes within 30 days, new powers of attorney from each client, and a tail endorsement on the liability policy before it lapses. The year after holds the first season with the buyer, the holdback measurement, the sale-year return and four years of notice records.
Each rule below comes from the California Board of Accountancy’s regulations and licensee pages, the Business and Professions Code, IRS Publication 3112 and the Form 2848 instructions, the Franchise Tax Board’s estimated tax and power of attorney pages, the EDD’s guidance on selling a business and CAMICO’s policy description, each read October 21, 2026 and linked at the end. What the practice is worth is in how much CPA firms sell for; the confidential process in selling confidentially; the notices in letters for selling a CPA practice; the team in what happens to your staff; the deferred price in holdbacks and earnouts; the tax in how the sale is taxed. The scored version of the readiness items is the sale readiness check.
- 01The date that sets the calendar is the mailing of the 16 CCR 54.3 consent notice. No client’s records move for 90 days unless the client consents first. Signing in early September and mailing within a week puts the files with the buyer in December, before the season.
- 02Months 24 to 12 set the price. CT Acquisitions reports multiples below 0.8x when the seller reviews every return or client concentration exceeds 25%, and toward 1.0x with documented engagement letters, a second reviewer and a 12 to 24 month transition.
- 03No client information leaves the office before a written nondisclosure agreement (BPC 5063.3(a)(4)). Diligence runs on coded data until the letter of intent.
- 04After closing the clocks are short: the EDD final return and account closure within 10 days of the sale; the IRS e-file office closed within 30 days, with the buyer’s new EFIN applied for between 45 days before and 30 days after the acquisition; the CBA told within 30 days of a change in shareholders or partners.
- 05In the sale year, a seller whose California AGI reaches $1 million ($500,000 married filing separately) must base estimated tax on 90% of the current year’s tax; the prior-year safe harbor is unavailable. Form 8594 goes with the sale-year return.
When should I start selling, and which date sets the rest?
The date that sets the rest is the mailing of the consent notice. Section 54.3 requires a written notice to each client in the sale, by first-class or certified mail to the last known address, or by email to an address the client has authorized in writing, and bars the transfer of a client’s records until consent or 90 days without an objection, whichever comes first. A notice mailed in the second week of September clears in early December. One mailed in mid-November clears in mid-February, with the season under way and the files of every client who has not answered still closed to the buyer. That is why the calendar below starts from the signing month and defaults to September.
How far ahead to start depends on the condition of the practice. CT Acquisitions adds 12 to 24 months of preparation in front of a sale when the books, the retention plan for key people and the technology are not ready for a buyer. CPAI, the AICPA’s insurance program, puts the sale itself at six months to a year and notes that buyers may hesitate to take on a practice during the January through April season. Ad Astra Equity tells owners to start at least 12 months before going to market. Twenty-four months covers the longest of these and leaves one full season for the changes to show in the fee history.
Your calendar from the signing month
Pick the month in which you would like to sign the purchase agreement. The calendar dates each phase, assumes the consent notice is mailed seven days after signing and the files move on the 91st day, and counts the items you tick. September is the default because, on those assumptions, it is the latest signing month that moves the files before January.
Earliest day the files move to the buyer
Items checked
24 to 18 months before signingNow to Mar 2027
18 to 12 months before signingMar 2027 to Sep 2027
12 to 6 months before signingSep 2027 to Mar 2028
6 months to signingMar 2028 to Sep 2028
Signing weekSep 1 to Sep 8, 2028
The 90-day windowSep 8 to Dec 7, 2028
Closing and the 30 days afterDec 8, 2028 to Jan 7, 2029
First season with the buyerJan 1 to Apr 15, 2029
12 months after closingThrough Dec 8, 2029
Signing is taken as the first day of the month you choose; the consent notice is mailed seven days later; the files move, and the deal is assumed to close, on the 91st day after the notice (16 CCR 54.3). A deal that closes at signing and moves the files later starts the 10-day and 30-day filing clocks at the earlier date. The first season is the January 1 to April 15 period that follows the file transfer. Checks are not saved when you leave the page. Not legal advice; settle the dates with counsel.
What should I fix 24 to 12 months before the sale?
The items buyers price appear in every published valuation guide, and each takes at least a season to show in the numbers. The table pairs each with what the guides say and the evidence a buyer will ask to see.
| Item | What the guides say | What to do 24 to 12 months out | Evidence a buyer asks for |
|---|---|---|---|
| The owner reviews every return | CT Acquisitions: compression below 0.8x is common when the seller is the lead reviewer on every return | A second reviewer on the business returns and a share of the individual returns for one full season | Reviewer sign-offs in the tax software |
| Client concentration | CT Acquisitions: compression above 25%. Ad Astra Equity: one client above 20% to 25% of gross fees triggers a 15% to 30% discount in buyer models | List the top ten clients by fees; where one carries more than a fifth, expect the holdback to be tied to it and introduce that client first | Fees by client for three years |
| Engagement letters | CT Acquisitions: documented engagement letters move the multiple toward 1.0x | A signed letter for every client, with written consent to electronic communication, so the 54.3 notice can go by email under subdivision (f) | The letters, and the clients without one |
| Season and recurring work | CT Acquisitions: 60% or more recurring monthly revenue with a designated successor reaches the upper end; season-concentrated practices compress | Offer monthly bookkeeping, payroll and planning to clients who buy them piecemeal | Monthly fees by service line |
| The books | CPAI’s list starts with three to five years of profit and loss statements, balance sheets, bank statements and returns | Separate personal expenses; document each add-back with the invoice or payroll record | An add-back schedule tied to the ledger |
| Receivables and work in process | CPAI lists billing and collections data | Collect or write off balances more than a season old; decide how receivables at closing are treated | Aging at month end |
| Attest work | CBA: audits, reviews, compilations and attestation work require a peer review every three years | Decide whether the attest work continues; if it does, keep the review current | The last peer review report |
| Key staff | No non-compete or client non-solicit binds a California employee (staff article) | Written terms for the senior preparer and the office manager; decide who gets a retention bonus | Roster with role, pay and hire date |
Two more items have no number attached. Read the lease for its term, assignment clause and renewal date, and do not sign a long renewal in the last two years without knowing whether a buyer keeps the office. And decide how long you will stay after closing: CT Acquisitions ties the upper end of its range to a 12 to 24 month transition, and the answer changes which of the four buyer types fit.
Which documents will a buyer ask for?
CPAI’s list is the usual starting point. Assemble it between 18 and 12 months before signing, so diligence is a matter of sending files rather than producing them.
| Group | Documents | When it is shared |
|---|---|---|
| Financial | Profit and loss statements and balance sheets for three to five years, cash flow statements, bank statements, the practice’s federal and California returns for three to five years, the add-back schedule | After the NDA, in summary first |
| Clients | Fees by client for three years with service line and tenure, the client list by type, engagement letters, billing and collections data, outstanding proposals | Coded until the letter of intent; named after it |
| People | Employee agreements, credentials, organization chart, pay and benefits, handbook, written procedures | After the NDA; staff are told after signing |
| Legal and regulatory | Partnership agreement or articles and bylaws, CBA firm registration or fictitious name permit, the last peer review report, NDAs already signed with other parties, the lease | After the NDA |
| Insurance and contracts | Professional liability declarations with retroactive date, limits and claims history; software, e-file and payroll service contracts; any license that names the practice | After the NDA |
Before an NDA is signed, nothing that identifies a client leaves the office. Business and Professions Code 5063.3(a)(4) permits disclosure of confidential client information in connection with a proposed sale or merger of the practice only if the parties sign a written nondisclosure agreement covering all client information shared. In the deals we see the client file goes in two stages, coded until the letter of intent and named after it; the blind profile, the NDA clauses and the coding are in selling confidentially.
What happens to my licenses, permits and filing numbers?
Several things the practice uses every day do not transfer, and the buyer has to hold its own before the first return goes out under its name.
| Item | Rule | What to do and when |
|---|---|---|
| CBA firm registration | A corporation notifies the CBA in writing within 30 days of a change in shareholders or address; a partnership within 30 days of a change in partners, address or telephone | Agree who files. A stock sale of an accountancy corporation is a change in shareholders |
| Firm name | BPC 5060: practice only under the name on the permit. A sole proprietor may register a fictitious name with the CBA (no fee, five years); a corporation or partnership needs prior approval of a name change ($250) | If the name continues, the buyer registers it before holding out under it |
| Peer review | Required every three years for audit, review, compilation, attestation and Yellow Book work; SSARS preparation engagements are outside it. On a merger the CBA refers firms to the AICPA Peer Review Program | Give the buyer the last report; ask the administering entity what the combined firm needs |
| Your license | Stays with you; the active, inactive and retired statuses are in the renewal article | Choose the status you hold after the transition |
| EFIN | Not transferable, even in a sale. The buyer files a new e-file application with proof of the sale between 45 days before and 30 days after the acquisition; in season, the IRS asks to be contacted before the acquisition | The seller tells the IRS within 30 days, through Close Office in e-Services |
| PTIN | Cannot be shared; every individual who needs one obtains their own | The buyer’s preparers sign with their own |
| IRS authorizations | A Form 2848 recorded on the CAF generally revokes an earlier one for the same matter; it does not revoke a Form 8821 | The buyer’s representatives obtain new Forms 2848 or 8821 after each client consents |
| FTB authorizations | FTB 3520-PIT (individuals and fiduciaries) and 3520-BE (entities) generally last six years; anyone named can revoke | The buyer files new declarations through MyFTB; you revoke yours with FTB 3520-RVK for clients who moved |
| Professional liability | CAMICO: claims-made-and-reported; claims after a firm discontinues its policy are not covered unless extended reporting coverage is in place, under the policy’s terms | Read the tail terms 12 months out; bind it before the policy ends |
The tail needs its own date. CAMICO describes the reporting period as the policy period plus a set time after it ends, often 60 days, and says CPAs who retire or cancel a policy are generally the ones who buy extended reporting coverage. Without it, a claim made a year after closing over a return prepared before the sale is not covered.
When do clients hear, and what must the notice say?
Clients hear after signing, in the notice 54.3 requires of a licensee who sells or transfers all or part of the practice and keeps no ownership in it. The notice requests consent to transfer the client’s records to the successor and states that consent is presumed if the client does not object within 90 days. Email is allowed only to an address the client authorized in a written agreement, which is why the engagement letters in the first phase carry that consent. You keep a legible copy of the notice and of every consent and objection for at least four years from the sale.
Three groups need their own step. A client who objects gets the records back without delay, or as agreed. A client whose notice comes back undelivered is not transferred: the records stay with you for four years from the sale, or for the seven years from the report release date that 16 CCR 68.3 applies to audit documentation under BPC 5097, whichever is longer, and are then destroyed so the personal information cannot be read. Clients outside the sale get their records back. Under 16 CCR 68 unpaid fees are no justification for holding a client’s records after the client asks for them, so receivables at closing are collected under the agreement and the invoices.
If no one buys the practice and it closes, 16 CCR 54.4 applies instead: a written notice to each client stating the date of discontinuance and, where you hold records, the date and method of their return, with the same four-year rule for clients you cannot reach. The text of each notice, ready to copy, is in letters for selling a CPA practice, and the paths for an owner with no successor are in succession planning when there is no successor.
When do staff hear?
After signing, before the first client letter, in person, with the buyer in the room. Before that meeting the roster is complete, the offers for the people the buyer keeps are attached to the purchase agreement, and the retention bonus for the one or two people the practice cannot run without is agreed. Final pay, vacation, Forms I-9 and W-2, and a calculator for the closing-day cost are in what happens to your staff when you sell your CPA firm.
What has to be filed within 10 and 30 days of closing?
The powers of attorney and the liability tail are in the table above; the rest of the closing-week filings are below. Some practice deals sign and close on one day and move the files on day 91; others close when the files move. The clocks below run from the sale or acquisition date, so the purchase agreement should state that date.
| When | Filing or step | Who | Source |
|---|---|---|---|
| Closing day | Final wages and accrued vacation for every employee in an asset sale | Seller | Staff article |
| Within 10 days of the sale | Final payroll tax return, wage report and payment to the EDD, and the employer payroll tax account closed, when no employees remain; this applies regardless of the normal due dates | Seller | EDD, Selling Your Business |
| Before the price is released in full | Certificate of Release of Buyer (DE 2220); until it is issued, the buyer holds enough in escrow to cover amounts the seller owes the EDD, up to the purchase price | Buyer requests, seller pays any balance | EDD |
| Optional | Transfer of the seller’s reserve account to the buyer (DE 4453) | Buyer | EDD |
| 45 days before to 30 days after the acquisition | New IRS e-file application with proof of the sale | Buyer | IRS Publication 3112 |
| Within 30 days | Notice to the IRS that the e-file business was sold or discontinued (Close Office) | Seller | IRS Publication 3112 |
| Within 30 days | Written notice to the CBA of the change in shareholders, partners or address | The registered firm | CBA |
| Quarter of the final wages | Final Form 941 with the closing box checked, the date final wages were paid, and a statement naming who keeps the payroll records and where; Form 940 marked final; Forms W-2 by the due date of the final Form 941, unless the buyer uses the alternate procedure in Rev. Proc. 2004-53 | Seller | IRS, Closing a business |
The EFIN window is easy to miss, because nothing fails until the buyer tries to transmit a return, and the IRS does not allow the buyer to use your EFIN in the meantime.
Which tax items belong to the sale year?
The IRS list for a business that is sold includes Form 8594, the asset acquisition statement, with the return for the year of the sale, and Form 4797 for business property sold. A corporation that adopts a plan to dissolve files Form 966, and the entity’s final return carries the final return box. The allocation reported on Form 8594 is settled in the purchase agreement, and it decides how much of the price is capital gain federally and how much is ordinary income; California taxes the gain as ordinary income. Both parts are worked through in how the sale of an accounting practice is taxed, together with the installment method for a holdback or a seller note.
Estimated tax changes the most. The FTB requires installments of 30%, 40%, 0% and 30%, due for 2026 on April 15, June 15, September 15 and January 15, 2027. With prior-year California AGI above $150,000 ($75,000 married filing separately), the payments are based on the lesser of 90% of this year’s tax and 110% of last year’s. With current-year California AGI of $1,000,000 or more ($500,000 married filing separately), they must be based on 90% of this year’s tax, and last year’s amount is no safe harbor. A sale gain that lifts AGI past $1 million puts the seller on that rule, so the estimates are planned with the closing date in view.
A practice held in an S corporation or a partnership has one more sale-year decision, the California pass-through entity elective tax; the FTB counts gain from the entity’s sale of its assets as qualified net income, and a sole proprietor has no election to make. The arithmetic is in the PTE elective tax article.
What is still open in the twelve months after closing?
- The first season with the buyer. Introductions client by client, the time in the office you agreed to, and a call to every client who did not answer the notice.
- The holdback or look-back. The purchase agreement sets the measurement date; CPAI describes retention periods from two years to five or more in the payout structures it covers. The terms to negotiate are in holdbacks and earnouts.
- The sale-year returns. Form 8594 and Form 4797, the final return box if the entity ends, and the January 15 estimated payment.
- The entity. If part of the price is paid to the selling entity over time, decide with your tax advisor when it dissolves.
- The records. The notice file and the records of unreachable clients for four years, audit documentation for seven years from report release, then disposal.
- Your license and the tail. The status you hold after the transition, and the extended reporting period on the liability policy.
How the checklist runs in a sale to WIN
Wilshire Intelligence Network buys established CPA and tax practices across California and pairs each one with a practicing CPA who becomes its owner. Equity capital is committed before we make an offer, with no financing contingency, and proof of funds is available at the letter of intent. The structure is cash at close, a retention-linked holdback or earn-out where the deal calls for it, a seller note on market terms and optional equity rollover. The firm keeps its name, its office and its people, and the staff offers are attached to the purchase agreement before signing. You stay two or three seasons at meaningful compensation and introduce your successor client by client, or step back sooner. The first step is one call with our CPA team; we send a written valuation, with terms, within 24 hours of it, and the call commits you to nothing.
Sources
- 16 CCR 54.3, Sale or Transfer of Licensee’s Practice and 16 CCR 54.4, Discontinuance of Licensee’s Practice, operative April 1, 2024; 16 CCR 68 (client records) and 16 CCR 68.3 (audit documentation retention under BPC 5097). Read October 21, 2026.
- Business and Professions Code 5063.3 (confidentiality and the sale or merger exception) and 5060 (firm names). Read October 21, 2026.
- California Board of Accountancy, Firm Licensure Applicant (30-day change notices, the $250 name change), Fictitious Name Permit Applicant and Licensee FAQs (peer review). Read October 21, 2026.
- IRS, Publication 3112, IRS e-file Application and Participation (Rev. 11-2025), FAQs about EFINs, Do I need a PTIN?, Instructions for Form 2848 (09/2021, line 6) and Closing a business. Read October 21, 2026.
- Franchise Tax Board, Estimated tax payments (updated January 21, 2026), Power of Attorney and the FTB 3520-RVK instructions. Read October 21, 2026.
- Employment Development Department, Changes to Your Business: Selling Your Business (10-day final return, DE 2220, DE 4453). Read October 21, 2026.
- CAMICO, Professional Liability Insurance: claims-made-and-reported coverage and extended reporting coverage. Read October 21, 2026.
- CT Acquisitions, CPA Firm Valuation 2026 (modified October 16, 2026); Ad Astra Equity, The Accounting Practice Sale Checklist (2026) (June 25, 2026); CPAI, A Guide to Maximize Your CPA Firm Sale. Read October 21, 2026.
This article is general information for California practice owners and is not legal, tax or insurance advice. The order of the steps, the closing date and the filings should be settled with counsel admitted in California, the practice’s tax advisor and its liability carrier before signing.
Denis is a practicing tax and accounting professional and the principal of VistaTax, a practice serving individuals and closely held businesses: individual and business tax preparation, tax planning, bookkeeping, financial reporting and payroll. As WIN’s founding CPA he anchors the licensed side of the structure and sits at the table for every transition. More about WIN’s team.