Startup Accountant or CPA: What to Ask Before You Hire

Do we need a bookkeeper, a startup CPA, or both?

Most venture-backed startups need both: a bookkeeper who records every transaction each month, and a CPA, enrolled agent or attorney who prepares and signs Form 1120 and can represent the company before the IRS. A bookkeeper keeps records; only those three credentials carry unlimited IRS representation rights, including audits, collection and appeals. One firm can do both jobs, but they are separate jobs.

A startup's case stops being simple when it has payroll in more than one state, early-exercised or incentive stock options, a research credit to elect, a founder or owner outside the US, or missed Delaware or IRS filings. Some of these choices have deadlines that cannot be fixed later, such as the payroll research credit election below.

Gather before the first call: the last Form 1120 filed, every Delaware notice and annual report, the cap table, SAFE and note agreements, founders' 83(b) copies, payroll reports, and read access to the bank and payroll accounts.

For the fee, see what startup accounting costs. To keep the books yourselves, see doing your own books or hiring a bookkeeper.

Who can prepare our Form 1120 and speak to the IRS for us?

Anyone paid to prepare a federal return must have a preparer tax identification number (PTIN), but only CPAs, enrolled agents and attorneys can represent the company in every IRS matter. Circular 230 lists who may practice before the IRS; the IRS sums up the rights by credential on its credentials page.

A paid preparer must sign the return and enter the PTIN on it, yet the company stays responsible for every item on the return (IRS Topic 254). Pick someone who will still be reachable if the return is examined.

How do we check a CPA's license and a preparer's PTIN?

Check a CPA's license with the board of accountancy in the state that issued it; each state's board keeps its own public record. For PTINs and federal credentials, the IRS keeps a directory of preparers with credentials that lists CPAs, enrolled agents and attorneys with valid PTINs. A preparer missing from the directory may still hold a valid PTIN, so ask for it, and confirm it appears on the filed return (IRS).

Ask whose name signs the return. A firm may be licensed while the person doing the work is not; what matters is who signs and who will represent the company.

Which startup filings should a startup CPA already know?

A startup CPA should handle each item below without research from scratch. Ask about the ones that apply to you.

Depth on each item lives in its own guide: Delaware franchise tax, US software development costs, the research credit against payroll tax and what the company files after granting options.

Does the accountant handle our home state, not only the federal return?

Ask directly. A Delaware C corporation usually owes income or franchise tax where it works, hires or sells, not only in Delaware. California, for example, charges a minimum franchise tax of $800 to every corporation incorporated, registered or doing business there, except in a newly incorporated or qualified corporation's first taxable year (FTB). Each state where an employee works also brings payroll registration and withholding.

An accountant who files only federal and Delaware returns leaves the home-state return to someone else. See which states a business files in and the full Delaware C corporation calendar.

What should we ask a startup accountant before hiring?

Ask questions that pin down scope and deadlines, because most missed filings fall between two providers.

What the answers cost is covered in startup accounting cost.

Which answers are red flags?

These answers are warning signs, either from IRS guidance or because the law changed.

• A fee based on the refund or credit. The IRS says to avoid preparers who charge a percentage of the refund (IRS Topic 254).
• A promise of a bigger refund or credit than others can get. Same IRS warning.
• A request to sign a blank or unfinished return. The IRS says never to do it.
• No PTIN on the return, or an unsigned return. Both are required of a paid preparer.
• No one to represent the company in an audit or collection matter. A preparer without a CPA, enrolled agent or attorney credential cannot handle collection or appeals; only an Annual Filing Season Program participant can handle an audit, and only of a return they prepared and signed.
• Amortizing all US developer pay without mentioning section 174A. For tax years beginning after December 31, 2024, deducting US research costs is the default and spreading them is an election (Form 1120 instructions).
• Quoting older QSBS limits for new stock. Stock issued after July 4, 2025 follows newer rules (QSBS guide).
• Taking a large Delaware notice at face value. The tax is the lesser of two methods, and the assumed par value capital method needs your asset and share figures (Delaware).

Form 8821 or Form 2848: what access will the accountant need?

Form 8821 lets the accountant see the company's IRS information; Form 2848 lets an eligible practitioner act for the company. An 8821 designee cannot speak for the company, advocate its position or sign waivers (Instructions for Form 8821). A Form 2848 representative must be eligible to practice before the IRS and can also receive the company's information (IRS).

Use Form 8821 for a bookkeeper or for an accountant who only needs transcripts. Use Form 2848 for the CPA or enrolled agent who will answer notices or handle an exam. Removing a former accountant's access is covered in switching accountants.

When do we need a controller or a CFO rather than more accounting hours?

No tax rule decides this; it depends on what the board and investors need. Once investors expect a monthly accrual close and a board package, the job is controller-level work, in-house or outsourced, with a CPA firm still on the returns. See monthly financials for investors and the board and, before a raise, cleaning up the books.

• A fractional CFO covers budgets, models and fundraising support; it does not replace the preparer.
• An audit is a separate engagement by an independent CPA firm, usually only when a lead investor or lender asks.
• A 409A valuation comes from a valuation provider, not from the tax return preparer.

What changes if a founder or the company is in Canada or abroad?

A foreign owner or founder adds filings that a domestic-only accountant may not handle. A US corporation with a foreign shareholder owning 25% or more is a reporting corporation and generally files Form 5472 for any year it has reportable transactions with a related party (Instructions for Form 5472); see what a preparer needs for a foreign-owned corporation. A founder living in Canada may owe Canadian tax on founder shares, so both countries' filings need to line up; see a Canadian co-founder with vesting US startup shares. A Canadian company with US activity starts with when a Canadian business needs a cross-border accountant.

Example

These examples are illustrative; figures are in US dollars.

Pre-seed, two founders, no revenue

Two founders form a Delaware C corporation, each files an 83(b), and the company spends $80,000 of their own money on development. It files one Form 1120, a Delaware annual report with franchise tax, and a home-state return. A few hours of bookkeeping a month is enough, and a CPA or enrolled agent signs the return. See the first return for a pre-revenue startup.

Seed, $2,000,000 raised, six employees

The company now has payroll in two states, two employees who early-exercised incentive stock options, and $400,000 of US developer pay. Its accountant files Forms 3921, completes Schedules L, M-1 and M-2 because assets passed the threshold, deducts the developer pay under section 174A, and, because the company is a qualified small business (receipts under $5 million this year, and its first receipts came within the last five years), elects the payroll research credit on a timely Form 6765. The questions that matter here: does the scope include both states, and who files the extension so the election is not missed?

Series A, $10,000,000 raised

The board wants monthly statements within a few weeks of month-end. The company adds controller-level work, in-house or outsourced, for an accrual close and board package, and keeps a CPA firm on the federal, Delaware and state returns.

Different for you?

• You are choosing between quotes: compare them with startup accounting cost.
• You are replacing an accountant mid-year: follow switching accountants and get corporate tax help.
• Returns or Delaware reports were missed: see the Delaware C corporation calendar and get corporate tax help.
• The books are behind before a raise: see cleaning up your books before fundraising and bookkeeping help.
• A founder or owner is outside the US: see a foreign-owned corporation's preparer checklist and cross-border tax help.
• Your company is Canadian with US activity: see when a Canadian business needs a cross-border accountant.