Nearly every California CPA practice sale is an asset sale, and in an asset sale your employees do not transfer. Their employment with you ends on the closing date and, for everyone the buyer keeps, begins with the buyer the same day. That one fact drives everything else. Final wages and every hour of accrued, unused vacation are due from you at closing under Labor Code 201 and 227.3. The buyer issues a new-hire wage notice, decides whether to keep your I-9s or complete new ones, and either takes over the year’s W-2 reporting or leaves you to file for the months before closing. Health coverage moves to the buyer’s plan or continues under Cal-COBRA. And nothing in California law lets you or the buyer hold a preparer in place: employee non-competes are void and now unlawful under Business and Professions Code 16600 and 16600.1, and client non-solicitation clauses have not survived in court since 2018. Retention is therefore bought, with a bonus paid after the first season, and buyers price it. In the deals we see the two people who decide the outcome are the senior preparer and the person who runs the front office, and both are told after signing, by you, with the buyer in the room.
Everything below is taken from the Labor Code and the Labor Commissioner’s published guidance, the Business and Professions Code, USCIS and IRS employer guidance, and the Department of Managed Health Care, each read October 20, 2026 and linked at the end. The letter and the memo you give staff are in letters for selling a CPA practice; the timing relative to clients is in selling confidentially.
- 01Asset sale: employment with you ends at closing. Every employee is owed all earned wages and all accrued, unused vacation or PTO at the final rate of pay on that day; a willfully late payment adds up to 30 days of wages under Labor Code 203. A stock sale or a merger of accountancy corporations continues employment and none of this applies.
- 02The buyer hires: a written wage notice under Labor Code 2810.5 for non-exempt staff, a choice under USCIS rules between new Forms I-9 and keeping yours, and under Rev. Proc. 2004-53 either two W-2s for the year or one from the buyer that includes your months.
- 03Health coverage: for an employer of 2 to 19 employees, Cal-COBRA gives up to 36 months of continuation if a plan ends; at 20 or more, federal COBRA. In most deals the buyer enrolls everyone in its plan from the first day and the question does not arise.
- 04No restraint: an employment non-compete is void (BPC 16600), including one in a contract is unlawful (16600.1, since January 1, 2024), and a client non-solicit has been held void since AMN Healthcare v. Aya (2018). Only the seller’s own covenant, tied to the goodwill sold, holds (16601).
- 05Cal/WARN notice applies only to an establishment that employed 75 or more people in the preceding 12 months. It does not reach a practice of five or twenty-five.
Do my employees keep their jobs?
Almost always, and for a reason that has nothing to do with sentiment: the buyer paid for a practice that runs, and in a tax practice the people who run it are the asset after the client list. A buyer who intends to let staff go will say so in diligence, because the retention holdback or the look-back price depends on the clients staying and the clients stay with the people they know. In the deals we see the purchase agreement lists every employee by role, states who will be offered employment and on what pay, and attaches the offer letters as an exhibit; what is not in writing before closing does not reliably happen after it.
The exceptions are predictable. A family member on the payroll at a salary the practice would not pay a stranger is usually not offered a role, and the add-back for that salary was already in the price. A seasonal preparer with no work between May and January is offered the same seasonal arrangement or none. In a merger with a local firm that already has a bookkeeper, an administrator and a tax manager, the duplicate seat is the one at risk, and that is the one conversation to have with the buyer before you sign rather than after. An individual buyer, a platform buyer and WIN keep the team because they have no duplicate seats to fill.
What the staff transition costs at closing
Four inputs give the vacation payout that falls due from you on closing day, the retention pool for the people the practice cannot run without, and the total. It assumes vacation is paid at the current rate and that the retention bonus is paid once, after the first season.
Vacation payout due from you at closing
Retention pool, paid after the first season
Vacation: annual payroll divided by 52, times the average weeks accrued (Labor Code 227.3 and the Labor Commissioner’s vacation guidance: paid at the final rate, no forfeiture, PTO treated the same). Retention: bonus percent times the key people’s average pay. The payout is the seller’s cost unless the purchase agreement moves it; the retention pool is negotiated and often shared. Not a wage calculation for any employee; run the actual balances from payroll.
What changes on closing day
In an asset sale you are the employer until the closing date and the buyer is the employer from it. The table is the list of things that happen on that day or are decided before it.
| Item | Rule | What it means in a practice sale |
|---|---|---|
| Final wages | Labor Code 201: wages earned and unpaid at discharge are due immediately. The Labor Commissioner treats any end of the employment relationship as a termination for this purpose | Payroll runs a final check for everyone dated the closing day, even for people who start with the buyer the next morning. Waiting time penalties under section 203 run to 30 days of wages if the payment is willfully late |
| Vacation and PTO | Labor Code 227.3: all earned and unused vacation is paid at the final rate on termination; vacation vests as it is earned and cannot be forfeited; a combined PTO plan is treated the same way | The balance on the books is a cash cost on closing day. Some agreements have the buyer assume the balances and credit the price; in that case the employee signs an acknowledgment, and counsel confirms the arrangement is one the Labor Commissioner will honor |
| Paid sick leave | Accrued sick leave is not required to be paid out at separation (Labor Commissioner’s paid sick leave guidance) | Balances restart under the buyer’s policy unless the buyer agrees to honor them, which most do for the people they are keeping |
| Wage notice at hire | Labor Code 2810.5: a written notice to each non-exempt employee at hiring with pay rates, payday, employer name and address, workers’ compensation carrier and sick leave rights; changes notified within seven days | The buyer issues it on day one, in the language used with the employee. Exempt staff, which usually means the licensed preparers on salary, are outside the notice |
| Form I-9 | USCIS: an employer that acquires another company may treat the acquired employees as new hires and complete new Forms I-9 with the acquisition date as the first day, or as continuing employees and obtain and keep the previous employer’s forms | Decide before closing and write it into the agreement. Keeping the old forms means inheriting any defects in them; most buyers complete new ones |
| Forms W-2 and 941 | Rev. Proc. 2004-53: under the standard procedure you and the buyer each furnish W-2s for your part of the year; under the alternate procedure the buyer issues one W-2 per employee covering both employers’ wages and you are relieved of filing for the transferred staff. Social Security wage bases continue only if the buyer is a successor employer | The alternate procedure is simpler for staff and is usual when the buyer takes the whole team; it is elected by agreement and reflected on Schedule D of Form 941. Your final Form 941 and your EDD account close on the quarter of the sale |
| Health coverage | Department of Managed Health Care: Cal-COBRA applies to employers and group plans covering 2 to 19 employees, up to 36 months; federal COBRA at 20 or more, 18 or 36 months, with Cal-COBRA extending an 18-month federal period | The buyer enrolls staff in its plan from the closing date, or the practice’s own small-group plan is assigned to the buyer where the carrier allows it. A gap of even a month is the question staff ask first; answer it in the offer letter |
| Retirement plan | Plan documents and ERISA, not the Labor Code | A SIMPLE IRA or 401(k) is terminated or assumed by the buyer under the plan’s terms; the third-party administrator and counsel settle it before closing, and employees are told whether their balances roll to the buyer’s plan or stay where they are |
| Cal/WARN | Labor Code 1400.5: a covered establishment is one that employed 75 or more persons in the preceding 12 months | Not applicable to a practice below that size, which is nearly all of them |
None of this applies if the deal is a stock sale of an accountancy corporation or a statutory merger. The employer does not change, the balances carry, and no final check is cut. Stock sales are rare for practices under a few million in fees because the buyer inherits the corporation’s history, but when a buyer proposes one, the staff mechanics above are the part that gets simpler.
What the law does not let anyone do: non-competes and client non-solicits
Owners ask whether the buyer can require the preparers to sign something that keeps them from leaving with clients. In California the answer is no, and the law got stricter in 2024. Business and Professions Code 16600 voids every contract that restrains anyone from engaging in a lawful profession, trade or business. AB 1076 added section 16600.1, effective January 1, 2024, which makes it unlawful to include a non-compete clause in an employment contract or to require an employee to sign one, and required employers to notify current and former employees by February 14, 2024 that any such clause was void; a violation is unfair competition under section 17200. SB 699 added section 16600.5, which makes a void contract unenforceable regardless of where or when it was signed and gives employees a private right of action. Since AMN Healthcare v. Aya Healthcare (2018) the courts have treated employee and customer non-solicitation clauses the same way, and a buyer’s counsel will not rely on one.
What a buyer can do is narrower and is already in place in a well-run practice: a confidentiality agreement that protects client information and the practice’s own records, which the confidentiality duties in BPC 5063.3 and IRC 7216 reinforce; a trade-secret claim if a departing employee takes the client list itself; and an employment agreement that sets pay, title and a bonus payable on a date. The only covenant that holds in a practice sale is yours, under BPC 16601, because you are selling goodwill. So the buyer prices the risk that a preparer leaves and takes clients, and the price of that risk is the retention bonus, the holdback, or both.
What changes by buyer type
The mechanics above are the same for every buyer. What differs is what the buyer does with the team in the following two years.
| Buyer | Jobs | Pay and benefits | Office and systems | What staff notice first |
|---|---|---|---|---|
| Individual CPA or EA buying a first practice | Everyone, usually; the buyer cannot run the season alone | Same pay; benefits depend on what the buyer can set up as a new employer, which is the gap to ask about | Same office through the first season; software changes if the buyer already runs a different package | The owner’s desk is occupied by someone less experienced in this practice; the seller’s presence through the season is what makes it work |
| Local firm, merger or acquisition | Everyone except the duplicate seat, usually administrative or bookkeeping | The larger firm’s scale, often better benefits, sometimes a new title ladder | Office consolidated within a year in many cases; the Journal of Accountancy’s retention guidance warns that a move of 30 miles costs clients | New procedures, new timesheets, new review layers |
| Private equity platform or roll-up | Client-facing staff kept; administrative, billing and IT functions moved to a shared center over one to two years | Platform benefits and sometimes equity for senior people; standardized pay bands | Office kept or consolidated by market; systems migrated to the platform’s stack on a schedule | A corporate employer, a new name on the paycheck, and the first season under the platform’s workflow |
| WIN | The firm keeps its name, its office and its people; a practicing CPA becomes the owner | Offers at the same pay carried in the purchase agreement; retention bonuses agreed before signing for the people you name | Same office; the technology partner’s platform is introduced after the first season, not during it | The owner you chose, in the office, through two or three seasons |
The retention bonus, and who gets one
A retention bonus is a fixed sum paid to a named employee on a date, conditioned on being employed on that date. It is not a restraint and is enforceable because it pays rather than restricts. In the deals we see it has four features. It is agreed between buyer and seller before signing and funded by one of them or both, because the seller’s holdback and the buyer’s first season both depend on it. It is paid once, after the first filing season, April 30 or May 15, with a second smaller tranche after the second season where the look-back runs that long. It goes to the one or two people the practice cannot run without, which in a tax practice means the senior preparer who signs or reviews most of the business returns and the person who runs the front office and will run the notice log, and not to everyone. And it is announced in the meeting after signing, in an individual letter, so that the person hears it from you and the buyer together rather than reading it in an offer.
The size is a negotiation, and the Los Angeles and Bay Area labor market sets the floor. Robert Half’s 2026 guide puts a Los Angeles tax manager at $144,100 to $193,225; a buyer who would otherwise recruit at that level to replace a departing senior preparer will fund a bonus that is cheaper than the search. The calculator above uses a percentage of pay because that is how the conversation runs, not because any rule sets it.
When they are told, and what they are told
After signing, before any client letter, in person, by you, with the buyer in the room. The sequence is the same in every sale that keeps its staff, and the reason is that people who learn of a sale from a client, or from the removal of your name from the door, do not forgive it. The meeting covers four things: who the buyer is, what changes in pay and benefits and the employer of record and when, that the office and the name continue, and how long you stay. The memo they take away, and the individual letters for the people with a bonus, are in the letters article. Before signing, the published guidance and the deals we see agree: the uncertainty of a pending sale costs you people, and nothing you can say before the agreement exists is certain enough to be worth that cost. The one exception is an internal successor, who should have been in the conversation years earlier.
Three people to think about before you sign
- The preparer who wanted to buy the practice. If a senior employee asked to buy and could not fund it, that person hears about the sale as a verdict. Tell them first, separately, and give them a reason to stay that is written down: a title, the bonus, or a path to equity under the buyer, which a platform buyer or WIN can offer and an individual buyer usually cannot.
- The administrator who has been there longer than some clients. The notice log for the 90-day client consent rule, the returned mail, the objections and the consents will be run by this person. If this person leaves at closing the window runs badly and the retention adjustment shows it. This is the second bonus.
- The family member on payroll. The salary was added back in the valuation, the role usually does not continue, and the final check at closing is the same as everyone else’s. Decide before the staff meeting what this person will be told and by whom.
What happens to staff in a sale to WIN
Wilshire Intelligence Network buys established CPA and tax practices across California and pairs each one with a practicing CPA who becomes its owner. The firm keeps its name, its office and its people. Offers of employment at the same pay are attached to the purchase agreement, retention bonuses for the people you name are agreed before signing, and the staff meeting happens after signing with us in the room. You stay two or three seasons at meaningful compensation and introduce your successor client by client, or step back sooner. The first step is one call with our CPA team; we send a written valuation, with terms, within 24 hours of it, and the call commits you to nothing.
Sources
- Labor Code 201, 203 and 227.3; Labor Commissioner’s Office, Paydays, pay periods, and the final wages and Vacation (vesting, no forfeiture, PTO, payment at the final rate), and Paid Sick Leave. Read October 20, 2026.
- Labor Code 2810.5 (notice at hiring, as amended by AB 636, effective January 1, 2024) and Labor Code 1400.5 (Cal/WARN definitions, 75-person covered establishment).
- USCIS, Mergers and Acquisitions and Handbook for Employers M-274, section 8.0: the two Form I-9 options for acquired employees.
- Rev. Proc. 2004-53: standard and alternate procedures for Forms W-2 and 941 when a business changes hands, Schedule D (Form 941).
- Department of Managed Health Care, Keep Your Health Coverage (COBRA): Cal-COBRA for employers of 2 to 19, federal COBRA at 20 or more, the 36-month periods.
- Business and Professions Code 16600, 16600.1 (AB 1076, 2023), 16600.5 (SB 699, 2023) and 16601; O’Melveny client alert on the February 14, 2024 notice and the AMN Healthcare line of cases on non-solicitation clauses.
- Journal of Accountancy, How to keep clients after an accounting practice sale (September 2016): office moves and policy changes as retention risks. Robert Half 2026 Salary Guide: Los Angeles tax manager range.
This article is general information for California practice owners and is not legal or employment advice. Final pay, benefits, plan terminations and the form of the transaction should be settled with counsel admitted in California and the practice’s payroll and benefits providers before closing.
Denis is a practicing tax and accounting professional and the principal of VistaTax, a California practice serving individuals and closely held businesses: individual and business tax preparation, tax planning, bookkeeping, financial reporting and payroll. As WIN’s founding CPA he anchors the licensed side of the structure and sits at the table for every transition. More about WIN’s team.