Moving On

Hello fellow tax and accounting professionals,

I am currently employed by a mid sized firm whom I've worked for for the last 6 years. I am planning on moving on and opening my own CPA office.

1 - I have clients whom I personally brought to this firm and will be coming with me to service they're accounting/tax at the new office. The clients that I have personally brought to the current firm are aware that I am leaving and acknowledged that they will be moving with me. Some of these clients are friends of mine who I've known from high school/college and others know me by word of mouth and built a relationship over time.

2 - I am the only CPA at this office that has been in contact with all clients during the last 6 years as the owner of the firm does not practice accounting and has had me manage the office. I am sure that there will be clients that will be "looking" for me, as clients normally do not like change, in order for them to have me continue providing them services. I have not told any of the clients, besides my own, that I am leaving the firm. My intentions are not to hurt anyone but simply to generate income where I will not worry about my future. My employer is an older gentlemen and I cannot take a chance of something happening where the children will take control of his assets and sell the firm while I gain nothing from my time spent at this firm.

I have asked the owner to allow me to buy shares into his company and becoming a partner and has countered with an unreasonable offer that included clauses in the agreement that I did not agree with. After time went by I asked my employer to sell the entire firm and his answer was bluntly no. After a week of our second encounter he issued an employee handbook asking for all staff to sign which raised a reflag as this occurred soon after our encounter regarding the firm. I declined to sign as there was a clause that stated that I am not allowed to speak with clients If I ever left the firm with no time duration and would have put me in a bad situation regarding the clients I personally brought to this firm. I came to a conclusion that their is no future in this office and I will regret not trying to build a firm on my own.

I want to know the legality of the situation and what I should and should not do regarding these accounts, both the ones I personally brought to this company and ones that may want to follow. I have not signed any paperwork as this firm was completely unorganized when I was first employed after college, hence the employee handbook issued to me after being employed there for five years, and have came a long way putting everything I had into this firm. also, if it came to a point where I would need an attorney to help me in this situation, what type of attorney would one need to help protect myself.

Again, I am not trying to hurt anyone but simply want to move on without having to look over my shoulder.

Any advice would be greatly appreciated

Yes you should seek the advice of an attorney. One who deals with employment law and professional practices.

Definitely consult an employment law attorney. You may be pleasantly surprised. I am in NC. My former employer issued an employment handbook, that changed the terms and conditions in my offer letter, a few weeks before he dispensed with my services. He offered no consideration for the changes. So the advice I received was that I could take on any clients that sought me out without regard to the two-year clause in the handbook.

Michigan may be different and your circumstances may be different to mine. However, I was pleasantly surprised at the advice I got.

Pretty sure in CA noncompetes are illegal. I only mention that to illustrate that state law matters. Please get an attorney.

At one point, Michigan had unfriendly noncompete laws. If I recall correctly, employers could unilaterally impose noncompetes without consideration, but that could have changed (or be wrong).

Pretty sure in CA noncompetes are illegal. I only mention that to illustrate that state law matters. Please get an attorney.

Some good advice here.
I changed firms about 9yrs ago. It was messy. I made assumptions about the agreement I signed and acted before I had all the information I should have had.
I can tell you are being thoughtful and that will serve you well.
I will echo the advice about an attorney. Let them take the lead in discussions. It might be expensive, but it may be important to have a disinterested party carrying out the conversation.
Also, educate yourself about the difference between noncompete and nonsolicitaion agreements.
Best of luck!

Also, educate yourself about the difference between noncompete and nonsolicitaion agreements.

Yup. Non-solicitation agreements are common in our profession.

Non-competes between employer and employee (and for no consideration at that?), not so much. A former employer can't stop you from making a living.

For non-compete you have to be paid for it to work- and it has to be backed by an agreement for a specific area. Non-solicitation agreements usually are tough to enforce. If any clients go with you because they heard from someone else that you had left. Then those tell a few more - up in the air and who wins besides the attorneys!! Get attorneys advice is a good idea. I do not think non-solicitation agreement works, but costs of ignoring must be considered.

For non-compete you have to be paid for it to work- and it has to be backed by an agreement for a specific area. Non-solicitation agreements usually are tough to enforce. If any clients go with you because they heard from someone else that you had left. Then those tell a few more - up in the air and who wins besides the attorneys!! Get attorneys advice is a good idea. I do not think non-solicitation agreement works, but costs of ignoring must be considered.

Having been through this myself, I disagree. Noncompetes are rarely enforceable except when a business is sold.
Nonsolicitation agreements are relatively easy to outline. Yes, clients may insist they go with you. In that case, a good nonsolicitation agreement will have clear liquidated damages. If you accept an engagement from a client you had a relationship with at your former firm, you have a certain dollar amount to pay to that firm, which is usually tied to fees.

Unfortunately I can't add any more legal advice value to this thread, but I can certainly provide some elementary input to your situation.

You are going to LOVE having your own practice.

If you are friendly, professional, caring, and responsive, your new practice will gain new clients and will so quickly become over-saturated with business that you won't know what to do with all of it.

Outside of your non compete and non solicit concerns, have no fear in this move and enjoy the process.

For non-compete you have to be paid for it to work- and it has to be backed by an agreement for a specific area. Non-solicitation agreements usually are tough to enforce. If any clients go with you because they heard from someone else that you had left. Then those tell a few more - up in the air and who wins besides the attorneys!! Get attorneys advice is a good idea. I do not think non-solicitation agreement works, but costs of ignoring must be considered.

Having been through this myself, I disagree. Noncompetes are rarely enforceable except when a business is sold.
Nonsolicitation agreements are relatively easy to outline. Yes, clients may insist they go with you. In that case, a good nonsolicitation agreement will have clear liquidated damages. If you accept an engagement from a client you had a relationship with at your former firm, you have a certain dollar amount to pay to that firm, which is usually tied to fees.

Agree with this - I went through the same thing back in the mid-2000's. Long story short I made a decision to leave my employer of a dozen years (which was a great decision) but it got messy with a counterclaim and attorneys involved (my attorney is a client, which helped) but we ended up settling for almost nothing. Part of the reason for the settlement was my attorney requesting financial records of my old employer in discovery as they were claiming lost income along with requesting the firm's policy manual (they had none but claimed that I violated it). They immediately wanted to settle as they didn't want to disclose their financial info.

For non-compete you have to be paid for it to work- and it has to be backed by an agreement for a specific area. Non-solicitation agreements usually are tough to enforce. If any clients go with you because they heard from someone else that you had left. Then those tell a few more - up in the air and who wins besides the attorneys!! Get attorneys advice is a good idea. I do not think non-solicitation agreement works, but costs of ignoring must be considered.

Having been through this myself, I disagree. Noncompetes are rarely enforceable except when a business is sold.
Nonsolicitation agreements are relatively easy to outline. Yes, clients may insist they go with you. In that case, a good nonsolicitation agreement will have clear liquidated damages. If you accept an engagement from a client you had a relationship with at your former firm, you have a certain dollar amount to pay to that firm, which is usually tied to fees.

Perhaps under Washington law that is true but it is absolutely not true nationwide. In Wisconsin, reasonable noncompetes are absolutely enforceable, with the caveat that an unreasonable noncompete will be thrown out in its entirety. When I left my previous firm, a couple billable hours with an attorney was well worth the money, and due to my employer's laughable noncompete I started my firm within a couple months of leaving with no worries whatsoever.

I agree that a good noncompete/nonsolicitation agreement will have clear damages, however I find in both public accounting and the private sector that it is rare to see a good agreement. Depending on the size of the mid-sized firm they might have a better agreement than smaller firms, but Al isn't exactly describing a firm that would normally have solid employment papers. My observation is that the true purpose of many of these agreements is often to be a paper tiger to scare you, and a cudgel to use if you piss off your former employer. They expect a few clients to leave, but if a surprising number leave, or if they find that you're directly targeting their clients, then they call the lawyer.

Al, I wish you the best of luck. But your luck needs you to invest in a few billable hours with a lawyer specializing in employment law in your state.

Very good point and I should have qualified my statement.
These laws ARE very state-specific.

Unfortunately I can't add any more legal advice value to this thread, but I can certainly provide some elementary input to your situation.

You are going to LOVE having your own practice.

If you are friendly, professional, caring, and responsive, your new practice will gain new clients and will so quickly become over-saturated with business that you won't know what to do with all of it.

Outside of your non compete and non solicit concerns, have no fear in this move and enjoy the process.

This seems extremely optimistic. Is the business that easy to penetrate as a solo, or do you suppose it’s possible that you are an outlier?

I had an expectation for the first year gross, and essentially doubled it.
You'd be surprised. I guess it depends on your personal market, and the degree of saturation.
I've picked up many clients in the first year that just couldn't get a timely response from their aging CPA.
They are happy to pay my rates, even when they are 50% higher than their old CPA, just to get a call back or reply to an email.

Unfortunately I can't add any more legal advice value to this thread, but I can certainly provide some elementary input to your situation.

You are going to LOVE having your own practice.

If you are friendly, professional, caring, and responsive, your new practice will gain new clients and will so quickly become over-saturated with business that you won't know what to do with all of it.

Outside of your non compete and non solicit concerns, have no fear in this move and enjoy the process.

This seems extremely optimistic. Is the business that easy to penetrate as a solo, or do you suppose it’s possible that you are an outlier?

I don't think so. Maybe my geographic area is less saturated than others, so could be.

Like recked - I gained a lot of clients because other practitioners were unresponsive.

I'm pretty good at the 4 traits I mentioned, but not exceedingly so. I blogged and networked bit, but not much. I told clients I was looking to grow my practice and asked them to refer people. I was sure to get my business on Yelp and Google. I reinvested 5% of my gross on pay-per-click Google ads for the first two years.

That's about it.

Same here - I've heard a bunch from new clients about how their CPA isn't responsive and is always pushing things to the deadline. My old employer is the master of this - everything gets pushed to the extended due date, and the billing is always way behind (clients wondering why they receive their invoice for services almost a year after the work is done). At least three years I had to work Labor Day weekend because all of our corporate work got pushed to the Sept extended due date, then had to work weekends up to Oct 15 for personal returns.

Now I try to get work out timely, and billing is always timely.