The accounting profession is evolving rapidly. With private equity (PE) investment becoming increasingly common in the profession, many CPA firms are rethinking their ownership models and organizational structures. One approach that has gained significant traction is the Alternative Practice Structure (APS).
For firms considering or already transitioning into this model, it’s important to understand not just the operational and compliance requirements of the APS, but also how these changes impact payment processing and regulatory obligations. After all, how your firm handles payments is directly tied to banking regulations, anti-money laundering (AML) rules, and attest independence.
In this post, we’ll break down what an APS is, why it matters, and what CPA firms need to know about payment compliance when adopting this structure.
What Is an Alternative Practice Structure (APS)?
At its core, an Alternative Practice Structure (APS) allows a CPA firm to separate its attest services (like audits and reviews, which are tightly regulated by state boards of accountancy and the AICPA) from its non-attest services (such as tax, advisory, and consulting).
The typical APS arrangement looks like this:
- Attest Firm: A CPA-owned, state-regulated entity responsible for assurance work. Only CPAs can hold ownership here, ensuring compliance with independence and regulatory standards.
- Non-Attest Business: A separate affiliated company offering services like tax, advisory, and consulting. This entity may be owned or managed by non-CPAs, including private equity investors or other external partners.
This separation enables flexibility. For example, while traditional rules restrict non-CPA ownership of CPA firms, an APS allows external investors to participate on the non-attest side. This opens the door to new capital, strategic partnerships, and expansion opportunities – without compromising regulatory requirements for attest services.
It’s no surprise, then, that with the rise of PE investment in the profession, APS structures are becoming increasingly common.
Why APS Impacts Payment Processing
While an APS provides exciting opportunities for growth, it also creates complexities — particularly in payment processing. Once a firm is split into two legal entities, the way payments are received, processed, and recorded must also change.
Here’s why:
- Each entity (attest and non-attest) is legally and financially independent.
- U.S. banking regulations require separate merchant accounts for each entity.
- Compliance with Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations applies to each legal entity separately.
This means a firm can’t simply run all payments through a single portal anymore. Instead, firms will need two separate payment portals, with distinct verification and compliance processes for each side of the business.
Key KYC and AML Requirements Under an APS
When setting up or restructuring payment systems in line with an APS, firms must navigate specific compliance requirements or KYC. Here are the essentials to keep in mind:
1. Entity Verification
Each entity must be verified individually by the payment processor. This includes:
- Legal business name
- Employer Identification Number (EIN)
- Registered business address
- State incorporation or registration details
This process ensures that regulators and payment networks can clearly distinguish between the attest firm and the non-attest business.
2. Beneficial Ownership Identification
Under the Financial Crimes Enforcement Network (FinCEN) Customer Due Diligence (CDD) Rule, payment processors must collect detailed information about ownership and control of each entity. This typically involves:
- Identifying individuals with 25% or more ownership
- Designating a “controlling individual” (often an executive or senior manager)
- Collecting government-issued photo identification (e.g., driver’s license or passport)
This protects the financial system by ensuring that firms can’t hide true ownership behind shell companies.
3. Segregated Fund Flows
Maintaining independence is critical in attest work. For this reason, attest service funds must not flow through non-attest accounts (and vice versa). To comply:
- Each entity should maintain its own merchant accounts, payment portals, and bank accounts.
- Clear audit trails must be preserved to satisfy regulatory requirements and ensure transparency.
4. Tax and Regulatory Classification
Each entity must also be properly classified for tax reporting. This means:
- Separate 1099-K forms will be issued for each merchant account.
- Attest entities may fall under different state-specific compliance rules for money movement.
Failing to maintain proper separation here can create both compliance risks and administrative headaches during tax season.
How QuickFee Supports Firms in an APS
Transitioning to an APS can feel daunting, particularly when it comes to ensuring compliance with payment regulations. That’s where QuickFee comes in.
QuickFee has worked with hundreds of CPA firms navigating this transition, and we’ve built our solutions to make compliance simpler while giving firms the flexibility they need to grow.
Here’s how we help:
- Separate Payment Portals: QuickFee creates distinct portals for your attest and non-attest entities. This ensures that funds flow correctly, independence is preserved, and regulators have clear visibility.
- Unified Firm View: Even though there are separate portals, we provide firm-level grouping views that allow users to toggle between accounts seamlessly from a single login. This streamlines daily operations for firm staff.
- KYC Onboarding and Verification: Our team manages entity verification and beneficial ownership validation during onboarding. This ensures that your firm meets U.S. banking system requirements from the start, without unnecessary delays.
By combining compliance with user-friendly tools, QuickFee enables firms to maintain independence, protect their reputation, and build capacity for future growth.
Bringing It All Together
Adopting an APS model is more than just a structural decision: It’s a strategic move that can open the door to new investment and service opportunities. But with this flexibility comes the responsibility to manage payment compliance correctly.
Firms need to:
- Recognize that each entity must stand on its own legally and financially.
- Meet strict KYC and AML requirements for both the attest and non-attest businesses.
- Maintain clear separation of fund flows to preserve independence.
- Prepare for separate tax reporting and regulatory filings.
By working with a payment partner like QuickFee, firms can simplify these complexities and ensure they remain efficient, compliant, and ready for growth.
Next Steps for APS and Payment Compliance
If your firm is considering an APS (or already in the process of restructuring), now is the time to review your payment setup. Don’t wait until regulators raise concerns or tax season highlights gaps in your reporting!
Reach out to your QuickFee Relationship Manager or contact support@quickfee.com and we’ll help you set up a compliant, streamlined payment structure that supports your firm’s long-term goals.
Not a QuickFee customer? Contact us here to learn more about how we can enable your accounting firm’s growth with an effective, secure payment platform.