Private equity and CPA firms: the investor owns everything except the audits

A private equity fund cannot own a single unit of a Florida CPA firm. Florida requires CPAs to hold at least 51% of a firm’s financial interest and voting rights, and requires every non-CPA owner to work in the firm as a principal occupation (Fla. Stat. § 473.309). A fund works nowhere. So the fund buys everything except the audits: the tax practice, the advisory work, the staff and the brand go into a new company the fund controls, and the licensed firm keeps only the attest work and its CPA owners.

That split, called an alternative practice structure, is how outside money entered the profession. It satisfies the ownership rules on paper. Whether it satisfies the independence rules depends on details regulators are still writing. This page covers who may own a CPA firm, how the split is built, and where it leaks.

Outside investors cannot own a majority of a CPA firm anywhere, and in most states they cannot own any of it unless they work there.

The majority rule, and the states that count differently

The model law most state boards follow, the Uniform Accountancy Act, requires that a simple majority of a CPA firm’s ownership, in both financial interest and voting rights, belong to licensees, and that non-licensee owners be active individual participants in the firm or its affiliated entities. According to the national association of state boards, at least 44 jurisdictions require non-CPA owners to be individuals, and Hawaii and the Northern Mariana Islands require 100% CPA ownership.

The states then measure the majority in different ways. Florida counts financial interest and voting rights, at 51%. California’s statute requires more than half the equity and voting rights, but its Board of Accountancy describes the rule as a headcount: licensed owners must outnumber unlicensed ones. California also looks through entity owners to the people behind them, requires non-CPA owners to participate in the firm on a “regular, continuous, and substantial” basis, and returns a non-CPA’s interest to the firm if that participation stops (Cal. Bus. & Prof. Code § 5079). Virginia’s 2026 firm renewal asks the firm to certify both tests at once: at least 51% of the owners and at least 51% of the voting equity must be licensees.

Texas requires a licensed majority and limits non-CPA owners to individuals actively involved in the firm or an affiliated entity, who must pass an ethics exam and be fingerprinted, and its board’s form requires them to be Texas residents (Tex. Occ. Code § 901.354). Illinois requires every owner, licensed or not, to be an active participant (225 ILCS 450/14.4). New York’s 2023 law requires non-CPA owners to be natural persons who actively participate in the firm or its affiliated entities, and the sponsor’s memo says plainly that “passive ownership is not permitted.” The same bill bars non-CPA owners entirely from a firm whose name includes “CPA.”

A cap table can satisfy the percentage and still fail the rule, because most states also ask who the non-CPA owners are and whether they work in the firm.

How the split is built

The structure separates the licensed work from everything else.

The attest firm keeps the license, the audit and review engagements, and its CPA owners. It must stay majority CPA-owned, and under the AICPA’s code CPAs “remain responsible, financially and otherwise,” for its attest work (ET 1.810.050). The services company takes the tax, advisory and outsourced accounting work, the employees, the leases, the technology and usually the brand. The investor owns a majority of the services company, and the CPAs roll over a minority stake. An administrative services agreement then has the attest firm lease its staff, space and systems from the services company for a fee.

Take a Florida firm with $20,000,000 of revenue: $4,000,000 of audit and review work and $16,000,000 of tax and advisory work. A fund offering to buy 60% of the firm cannot buy any of the licensed LLC. Instead, the $16,000,000 practice moves to a new services company, owned 60% by the fund and 40% by the six CPA partners. The attest firm keeps the $4,000,000 audit practice, pays the services company, say, $2,800,000 a year for staff and overhead, and distributes the remaining $1,200,000 to its CPA owners. The fund owns 60% of a business whose earnings include that $2,800,000 fee, and none of the firm that signs the audit opinions. These figures are illustrative.

Where the split leaks

The first leak is the fee. If the services fee rises and falls with the attest firm’s profit, the investor’s share of the services company starts to function as a share of attest profit, which is exactly what the ownership rule forbids. The national association of state boards said so in its April 2026 comment to the AICPA: an outside investor’s economic stake compromises independence “regardless of the ownership percentage,” and debt and loan covenants can create influence too.

The fee formula, not the ownership percentage, is where an alternative practice structure succeeds or fails.

The second leak runs through the SEC. Its independence rule defines the “accounting firm” to include the organization’s parents, subsidiaries and “associated entities” (17 C.F.R. § 210.2-01(f)(2)). In an August 29, 2022 staff statement, the SEC’s acting chief accountant described a fund invested in an accounting firm, the fund’s general partner and its adviser, and said a reasonable investor would see all of them as associated entities, making them part of the accounting firm. He said “it would be a high hurdle” for the firm to stay independent while providing audit or attest services touching any entity in the private equity structure. A firm with public-company audit clients is therefore auditing next to its own investor’s portfolio.

The third leak is the definition that makes the split possible. Texas, New York and the model act let non-CPA owners qualify by being active in the firm “or an affiliated entity.” That lets people who work at the investor-owned services company hold part of the attest firm. It makes the ownership test easier to pass and ties the two companies more tightly together, which is the connection independence rules exist to police.

The rules are still being written

The AICPA’s ethics committee exposed proposed rules for private-equity-backed structures on December 19, 2025, and the comment period closed April 30, 2026. The committee did not adopt them at its summer 2026 meeting and was weighing a second exposure draft and a new rule barring audit clients from investing in firms, with an interim meeting scheduled for October 19, 2026. Any final rule takes effect one year after adoption. Until then, firms operate under the existing interpretations, which date to 2000.

State boards are watching rather than acting. Virginia’s 2026 firm renewal asks every firm whether it is part of an alternative practice structure, and Maryland’s board minutes from August 2026 note that other states are adding similar questions. No state board enforcement action aimed at a private-equity-backed structure was found for this page.

The bottom line

Every state keeps a majority of a CPA firm in licensed hands, Hawaii keeps all of it, and most states require non-CPA owners to be individuals who work in the firm.

States measure the majority differently, by equity, by headcount, or both.

Private equity enters by splitting the firm: the attest firm stays CPA-owned, and the investor owns the company that provides everything else.

A services fee that tracks attest profit undoes the split economically, whatever the ownership percentages say.

Under SEC rules, the investor’s fund, general partner and adviser can count as part of the accounting firm.

The AICPA’s rules for these structures were proposed in December 2025 and had not been adopted as of October 2026.

What this page does not cover

Professional LLCs generally are on licensed professions. Law and design firms are on law firms and engineering and architecture firms. The four ownership models across licensed businesses are on who is allowed to own a licensed business. Whether a services company may use the firm’s name without a license turns on each state’s holding-out rules, which this page does not survey.

Last verified October 2026.