409A Platforms for the New Wave of PE-Backed CPA Firms

In an alternative practice structure, the attest entity, the one that signs audit opinions, generally has to stay majority-owned by licensed CPAs under state board rules, which vary by state and are worth confirming directly with your regulator rather than assuming. The advisory or consulting entity sitting alongside it is usually a separate C-corp or LLC that can accept outside capital and grant options to non-CPA hires like technologists or client-service staff. Get clear on which entity you're actually valuing before ordering a report, since pricing the wrong one wastes the engagement.

Even the advisory side of a CPA firm often carries some residual seasonality from tax season, though usually far less than the attest and compliance side does. An appraiser building your valuation needs a full trailing-twelve-month view rather than an annualized run rate from a single quarter, or the number will overstate or understate the business depending on which months got sampled.

If your firm's PE sponsor has already backed several other accounting practices, ask what platform those sister firms use. Sponsors that run a portfolio strategy across multiple CPA firms often standardize on one cap table platform to simplify consolidated reporting across the group, which means the practical choice may already be decided above your finance team's level.

If no standard exists yet, this is a reasonable moment to advocate for one, since your firm may not be the only practice in the portfolio needing a 409A on a recurring basis.

For a single advisory entity granting its first option pool to a handful of senior consultants and technologists, Carta's more startup-native workflow is the simpler starting point and moves faster. Once a sponsor's portfolio grows past two or three accounting platforms, each with overlapping partners and staff moving between them, Shareworks' multi-entity administration starts to earn its more complex setup.

Rules on non-CPA ownership and profit-sharing vary meaningfully by state, and some state boards have specific restrictions on how much of a firm's economics can flow to non-licensed individuals even in an advisory-only entity. This is a compliance question for your firm's regulatory counsel, not something either cap table platform can answer for you, and it should be settled before your first option grant, not discovered afterward.

The most common misstep in this transition is granting options in the new advisory entity before the legal separation from the attest partnership is fully documented and closed. Say your firm's PE deal is expected to close in six weeks, and a senior technologist accepts an offer letter that references equity in the advisory entity. If that entity hasn't been formally incorporated, capitalized, and separated from the partnership at the time the offer goes out, you've created a grant with no clean issuer behind it. Unwinding that later means re-papering the grant, refiling the 83(b) if one was filed, and possibly re-running the valuation on a different effective date.

The fix is sequencing, not software. Confirm with deal counsel that the advisory entity legally exists and is capitalized separately from the partnership before any offer letter references its equity, then order the 409A for that entity as of a date after its formation and close to the grant, and ask the valuation provider how to treat the announced PE deal. A valuation dated before the entity existed doesn't hold up well if it's ever questioned in an IRS audit or an acquirer's diligence process down the line.

This sequencing question matters more than which platform you pick, since both Carta and Shareworks will happily price and administer a grant regardless of whether the underlying entity is properly formed. Neither vendor will flag the sequencing problem for you. That's your deal counsel's job, and it's worth raising explicitly on the closing checklist rather than assuming someone else owns it. Firms that skip this step tend to discover the gap only when a new hire asks a pointed question about their offer letter, which is a worse time to find out than during deal structuring.

One more thing worth checking at the same time: make sure the advisory entity's cap table platform is set up under the advisory entity's own EIN, not borrowed from the partnership's existing accounting setup for convenience. It's a small administrative detail that's easy to skip during a busy close, and it's exactly the kind of thing a future diligence team checks first.

Before the deal closes, work through this checklist:

• Confirm the advisory entity is formally incorporated and its legal separation from the attest partnership is fully documented and closed before any option is granted.
• Hold offer letters that reference advisory entity equity until that separation is complete, even when the private equity deal is expected to close within weeks.
• Ask regulatory counsel how your state board treats non-CPA equity holders, since restrictions vary by state and neither platform can answer that question.
• Ask your sponsor which cap table platform its other accounting portfolio firms use, since the practical choice may already be decided above your finance team.
• Base the valuation on a full trailing twelve months, not an annualized single quarter, to account for residual tax season effects.