No license needed for bookkeepers

Special to The Times

Question: I'm a registered tax preparer and notary and would like to expand my business to offer bookkeeping services. Is there any registration or licensing that I must obtain?

Answer: There is no state or federal licensing requirement for bookkeepers, said Lisa Schwartz, a partner in the accounting firm of Mitchell & Schwartz, based in Camarillo.

"You probably already have a local business license to operate your tax preparation company. That should be sufficient for your bookkeeping service also, though it wouldn't hurt to contact your city to make sure," Schwartz said.

To market your service, consider joining the American Institute of Professional Bookkeepers ( That group offers a certification program that involves passing a national proficiency test and signing a code of ethics.

Although the certification isn't mandatory, obtaining it may lend credibility and give you a competitive edge.

Schwartz suggested that you also contact local certified public accountants. "A lot of accounting firms will farm out bookkeeping work to individuals who charge less per hour because CPA rates are too expensive for their clients. If the accounting firms get to know you and respect your work, they may form cooperative business relationships with you," she said.

Networking with local small- business owners at groups such as the chamber of commerce would also be a good marketing strategy for you.

How to give a colleague

a cut of the business

Q: I own a small service firm and have one associate who has worked for me for seven years. I'd like to make him a partner, but I'm not sure what kind of agreement to make with him.

A: The agreement will depend upon how your company is structured legally.

If you're operating as a sole proprietor, you and your associate could form a general partnership together, said Stuart Blake, an attorney and principal of Orange County-based General Counsel.

If your firm operates as a corporation or limited liability company, you have several alternatives, including giving your associate an equity interest in the corporation or setting up a "phantom stock" plan that would reward your associate with bonuses tied to the company's profitability.

"A phantom stock plan would give your associate a stake in the business and tie him financially to its success without your having to give up your ownership stake," Blake said.

The National Center for Employee Ownership provides information about phantom stock plans at you want to make your associate an equity partner in the firm, be aware that you need to be willing to give up absolute control of your company's future, Blake said.

"Up until now, you've probably made all the decisions by yourself, so having a partner can be a big shift in your thinking," he said.

Giving your associate an equity stake in the business is more likely to tie him to the firm and reduce the risk that he will leave for another job, however.

If you decide to make him an equity partner, you'll need to have a business valuation done by a professional and then determine how much of the company you're willing to give up. Your associate could buy into the firm by contributing a lump sum or paying for his shares over time.

"If your associate couldn't get financing or didn't have money saved up to invest a lump sum, there are ways you could help him with the funding," Blake said.

For instance, you could divert a portion of his salary or regular bonuses into his investment in your company.

Talk to your lawyer about executing a "buy-sell" agreement if your long-term strategy involves retiring and having your associate take over the business, Blake said.

Got a question about running or starting a small enterprise? E-mail it to karen.e.klein@latimes .com or mail it to In Box, Los Angeles Times, 202 W. 1st St., Los Angeles, CA 90012.

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