Practice continuation agreement definition
/What is a Practice Continuation Agreement?
A practice continuation agreement (PCA) allows another firm or trusted staff person to take over an accounting practice for a period of time, depending on certain triggering events, such as the illness or permanent disability of the CPA. The PCA includes provisions for the responsibilities of the entity that will take over, the conditions under which the arrangement will terminate, billing and collection procedures, compensation to be paid to the successor, record retention rules, announcements to clients, staff oversight, and the terms associated with the purchase of the CPA’s practice in the event of permanent disability or death. Entering into a PCA is a prudent move for very small firms that have no backup personnel in-house.
A sole practitioner who wants to set up a PCA should review prospective candidates to see if they have sufficient capacity to take on the CPA’s practice, as well as comparable pricing, relevant expertise, and a comparable culture.
Types of Practice Continuation Agreements
There are several types of practice continuation agreement, which are as follows:
One-on-one agreement. This is the most common agreement, which is between two sole practitioners. This agreement typically mandates that either party can purchase the other practice when there is a triggering event.
Group agreement. Under this agreement, several CPAs agree to be listed as successors to each other’s practices; in the event of a death or disability, clients can select a replacement CPA from the surviving members of the group.