Podcasts

Building Sustainable Accountability: How to Maintain Momentum Year-Round

Earmark Team · February 24, 2025 ·

Every January, millions of people set out to transform their habits, only to find themselves struggling by mid-month. In fact, the second Friday of January is known as “Quitters Day,” when many throw in the towel on their New Year’s resolutions. For accounting professionals, the challenges compound: a 2024 Forbes study reports that 50% of resolution-makers quit by March—precisely when tax season intensity is at its peak.

In a recent episode of the Who’s Really the BOSS? podcast, Rachel and Marcus Dillon of Dillon Business Advisors (DBA) acknowledge these hurdles but also share practical ways to overcome them. As accounting firm owners, they see firsthand how easy it is for accounting professionals to abandon both personal and professional goals amid looming deadlines and long work hours. Yet the Dillons have developed reliable strategies—grounded in accountability and careful planning—that can keep momentum strong year-round.

The Unique Pressure on CPA Firm Owners

While most people struggle to sustain enthusiasm after the holidays, accounting firm owners have a double challenge. January’s fresh start quickly collides with ramping up for busy season, and by the end of March, many people’s goals have fallen by the wayside. After April 15th, it’s tempting to celebrate the season’s end or simply recover, making it even harder to pick up abandoned routines.

“I just do not like January at all,” admits Marcus. “A lot of us grew up in accounting—we dread January and starting the year new.” When you start with a clean P&L and the celebration of last year’s successes ends, accountants often feel they’re starting from scratch. Layer on the time crunch of tax deadlines, and it’s easy to see why many resolutions vanish by March.

Rachel adds, “You think ‘I just need to get through the next few weeks or this deadline,’ and really, you just let everything from January and February go.” Instead of waiting for post-deadline recovery to refocus, the Dillons recommend building accountability systems that prevent goals from slipping in the first place.

Goals for 2025: Firm Growth and Beyond

The Dillons prefer the concept of measurable goals over open-ended resolutions. DBA heads into 2025 with clear objectives:

Organic growth. DBA plans to add 15 new monthly recurring clients in 2025. With a price point for each client at $2,000 or more per month, this goal translates to adding $30,000 in new monthly recurring revenue by year’s end. To manage quality control, DBA limits each “pod” to two new client onboardings per month.
Potential firm acquisition. Beyond organic growth, the Dillons are open to non-organic expansion through the right acquisition. This approach provides additional career advancement opportunities for existing team members.
Technology & process improvements. Newly hired Director of Technology, Angel Sabino, will evaluate DBA’s IT systems and relationships to ensure they can support future growth. The team plans to expand its use of Keeper for client workflows and more automation in their onboarding process. They also plan to eliminate software they’re not fully testing or utilizing to free up room in the budget and focus on enhancing core platforms.
Team development. Client Service Managers meet monthly to share best practices, while Controllers hold their own dedicated development sessions. This ensures training and collaboration throughout the year. New and existing SMEs (Payroll, Tax, QBO) serve as go-to resources for the rest of the team. DBA plans to hire additional staff, including a Controller and a new Client Service Manager Assistant through TOA Global.

“Even though goals like these can feel daunting, we break them down,” Marcus explains. “We track them month by month, adding them to our weekly meeting agendas and quarterly reviews. That way, no one person is carrying the full burden, and we can re-evaluate often.”

Personal Accountability: Small Steps, Big Payoffs

Both Rachel and Marcus rely on personal accountability to stay on track.

Fifteen years ago, Rachel began a morning weightlifting habit and hasn’t stopped. In 2024, she hit 302 workouts—exceeding her personal target of 300—by tracking each session in a free app. Visibility of her progress, especially late in the year, motivated her to stick with the plan.

“I track everything so I can see how far I’ve come,” Rachel explains. “When we traveled to New York, I still got up early because I knew I had a goal I wanted to meet.”

Marcus uses a structured approach spanning faith, marriage, health, and more. “I assign a measurable goal or metric to each category—did I do it or not?” he says. That clarity helps him refocus on days he would rather skip workouts or other commitments.

“Sometimes I literally break a workout into percentage points. If I’m halfway done, that’s 50%, and I tell myself I’m not going to quit at 50%. Same when I’m at 75%. It keeps me motivated.”

Accountability Strategies to Withstand Tax Season

How do you maintain progress toward goals when you’re knee-deep in client work? The Dillons recommend three main strategies:

Break it down. Make goals specific and measurable, then divide them into weekly or daily steps. Whether it’s limiting client onboarding each month or aiming for 20-minute workouts, smaller tasks are more achievable.

Keep it visible. DBA incorporates goals into weekly meeting agendas, ensuring they’re never “out of sight, out of mind.” Similarly, Rachel’s app and Marcus’s weekly check-ins with his accountability partner keep them aware of their personal targets.

Stay flexible. Life happens—especially during busy season. The Dillons suggest building in reassessment milestones (e.g., a mid-year retreat in May or June) to pivot if goals no longer make sense. Instead of abandoning them, adjust and realign.

Looking Ahead: The Collective by DBA Event

For accountants seeking deeper connections and guidance, the Dillons’ peer community, Collective by DBA, is hosting an in-person event on May 5th–6th in The Woodlands, Texas (with a third-day session on May 7th for forum members and one-on-one advisory clients).

Registration opens on January 28th, and only 50 seats are available. The retreat provides an opportunity to fine-tune your firm’s processes, swap insights with other leaders, and solidify your goals for the rest of the year.

“If it’s anything like our event last May, it’ll fill up fast,” Marcus says. “We’re building an agenda that dives into topics like firm growth, technology, and team structure—all the areas we’re working on ourselves.”

Maintaining Momentum Beyond January

While most resolutions taper off by March, the Dillons prove that real progress can happen any time of year—with the right structure. By breaking down targets, checking in frequently, and involving others, firm owners can continue working toward their goals well past busy season. Whether you’re building better habits in your personal life, scaling your firm, or both, the key is accountability—layered at the individual, team, and organizational levels.

Ready to learn more? Tune in to the Who’s Really the BOSS? podcast for the Dillons’ full conversation on goals and accountability, and consider joining them in May at Collective by DBA’s in-person event. Even in the throes of tax season, sustainable, measurable goals are possible when you have a plan—and a team—to keep you on track.

Rachel and Marcus Dillon, CPA, own a Texas-based, remote client accounting and advisory services firm, Dillon Business Advisors, with a team of 15 professionals. Their latest organization, Collective by DBA, supports and guides accounting firm owners and leaders with firm resources, education, and operational strategy through community, groups, and one-on-one advisory.

From Sponsorships to Fake Consultants—Inside the Airbus Bribery Scheme

Earmark Team · February 17, 2025 ·

Modern corporate bribery rarely looks like someone handing over a briefcase of cash. It often masquerades as something legitimate: a sports sponsorship, an inflated “consulting” contract, or a generous commission payment.

As discussed in an episode of Oh My Fraud, one of the most striking examples is the Airbus bribery scandal, which resulted in the largest bribery fine in world history—€3.6 billion.

From Watergate to the FCPA

Corporate bribery isn’t new, but its legal and ethical landscape changed significantly in the 1970s after the Watergate scandal revealed a web of illicit corporate payments. In response, Congress passed the Foreign Corrupt Practices Act (FCPA) in 1977, prohibiting bribery of foreign officials and requiring accurate financial records. The FCPA doesn’t just apply to U.S. companies; it also covers foreign companies listed on U.S. stock exchanges or operating within the United States. This means that industry giants like Airbus can face American prosecution if they’re caught bribing, no matter where they are located.

Airbus Takes Flight—and Then Self-Reports

Founded in 1970 by French, German, and British aerospace firms (Spain joined later), Airbus’s mission was to compete with American manufacturers like Boeing. By 2003, Airbus surpassed Boeing and became the world’s largest commercial aircraft maker.

Yet in 2016, an internal Airbus audit discovered a systemic bribery operation: “secret agents” were allegedly bribing officials to secure plane sales worldwide. Faced with French laws that would revoke operating licenses for bribery convictions—and an even steeper potential fine of €8 billion—Airbus surprised everyone by self-reporting to the Parquet National Financier (PNF), France’s financial crimes investigative body.

Inside the Massive Bribery Scheme

The Airbus bribery setup was surprisingly elaborate:

Secret Agents and Shell Companies
Airbus hired intermediaries—sometimes called “secret agents”—to close deals. These agents requested large “commissions” Airbus paid to shell companies with opaque ownership. A portion of that money went to officials in Ghana, Sri Lanka, Malaysia, Taiwan, Indonesia, China, and elsewhere.

Sports Sponsorships as Kickbacks
In one example, Airbus paid $50 million to sponsor a sports team owned by an airline executive. In return, the airline ordered 180 planes. Even if each plane were the least expensive model (over $70 million apiece), Airbus captured a staggering deal in exchange for a $50 million bribe concealed as “sponsorship.”

Consulting Contracts for Spouses
Another scheme involved hiring an airline executive’s spouse as a highly paid consultant. The spouse had zero aviation experience, making it clear the contract’s real purpose was to influence purchasing decisions.

These arrangements gave Airbus “plausible deniability”: officially, they were paying for legitimate-sounding services.

The Record-Breaking Settlement

By cooperating fully after their self-disclosure, Airbus negotiated a Deferred Prosecution Agreement (DPA) rather than face trial. Under the DPA:

Historic Fine
Airbus agreed to pay €3.6 billion—the largest bribery fine ever imposed. If they hadn’t turned themselves in, estimates suggest it could have topped €8 billion.

Three-Way Split
The French PNF, the UK’s Serious Fraud Office (SFO), and the U.S. Department of Justice (DOJ) shared the settlement. The DOJ alone collected roughly half a billion euros.

Leadership Shakeup
Although he wasn’t forced out, CEO Tom Enders resigned, expressing genuine remorse and a desire for Airbus to reform. An ongoing class action lawsuit from Airbus shareholders claims the company misled investors about its business practices.

Is It Marketing or a Bribe?

One reason corporate bribery is so insidious is that it can closely resemble legitimate business development. From event tickets to lavish client dinners, there is often no bright line defining when hospitality veers into bribery. Private-sector organizations don’t always have a rigid gift limit—like the $20 rule, the U.S. military has—making it even harder to police.

According to the 2024 ACFE Report to the Nations, the median loss to corruption is $200,000. Yet tracking actual losses is complicated. In Airbus’s case, officials needed new aircraft either way, so the “loss” might be seen as switching from one vendor to another for questionable reasons. It underscores how intangible “costs” can be when bribes drive commercial decisions.

Lessons for Finance Professionals

The Airbus scandal highlights a rapidly evolving corruption landscape:

Structural Sophistication
Bribes are concealed through sponsorships, commissions, and consulting contracts rather than suitcases of cash.

Gray Areas vs. Bright Lines
Understanding intent is crucial. Based on purpose and scale, the same “thank you” gift can be innocent or corrupt.

Robust Compliance Measures
Basic compliance and traditional red flags may fail to uncover cleverly disguised bribery. Periodic internal audits, detailed transaction analysis, and cultural shifts emphasizing ethics are vital.

Global Enforcement
In an interconnected world, bribery probes are often multinational. Being listed or doing business in certain countries (like the U.S.) exposes companies to multiple layers of enforcement.

In the end, Airbus’s self-reporting likely saved the company from greater financial and operational damage, yet the scandal still cost billions and tarnished its reputation. To hear a more in-depth discussion of how Airbus got “AirBusted,” check out the full Oh My Fraud podcast episode.

DC Solar’s Billion-Dollar Green Energy Con

Earmark Team · February 7, 2025 ·

The following article is based on the “Burned by Solar” episode of the Oh My Fraud podcast, which provides a behind-the-scenes look at how DC Solar orchestrated one of the largest green energy frauds in U.S. history.

In December 2018, 175 federal agents from the FBI, IRS, and U.S. Marshals raided the headquarters of DC Solar and the California home of its CEO, Jeff Carpoff (sometimes spelled “Karpov” in news reports). This dramatic event unveiled one of the largest frauds ever prosecuted in the Eastern District of California—a scheme that claimed to sell 17,000 portable solar generators when, in reality, only about 6,000 existed.

Origins and Ambitions

Jeff Carpoff spent most of his life in Martinez, California. After failing to run successful auto repair shops and briefly selling drugs, he sobered up and co-founded a shop specializing in Land Rover repairs. Eventually, he latched onto a promising idea—creating portable, solar-powered generators he called the “Solar Eclipse.” This invention would supposedly replace traditional gas or diesel generators on movie sets, at disaster sites, and even in stadium parking lots during tailgates.

DC Solar marketed these generators as versatile, eco-friendly power sources that could be towed anywhere to provide clean energy. While the vision looked sound, it was the business model—centered on a lucrative federal tax credit—that truly turned heads among investors.

The 30% Tax Credit Hook

The U.S. government offered a 30% tax credit for investments in alternative energy equipment, including solar. DC Solar pitched a straightforward proposition to prospective investors:

Purchase DC Solar’s generators, sold at a hefty price of $150,000 each.
Pay only 30% of that cost upfront (the exact amount investors would recoup via the federal tax credit).
DC Solar would cover the remaining 70% of the purchase price through lease revenue.

In theory, investors could fully offset their upfront cost with tax credits—and possibly earn additional returns if leasing income exceeded loan payments. Companies like Sherwin-Williams, T-Mobile, and even Warren Buffett’s Berkshire Hathaway bought into the hype, hoping to cut their tax bills while backing a “green” initiative.

Early Warning Signs

Despite its promise, DC Solar’s operations quickly drew skepticism. During a visit to one of the company’s facilities, Sherwin-Williams representatives discovered only a few rows of fully assembled units. Behind them, dozens of unfinished generator shells suggested the product was far less complete than advertised. Confronted about it, Carpoff reportedly brushed the issue aside.

Other troubling red flags emerged:

Performance Failures: Some trailers lost power on major film sets and at concerts, forcing DC Solar to sneak in diesel generators to cover the outage.
Lease Rate Discrepancies: DC Solar claimed that 80–90% of its generators were leased out, but internal accounts put the rate closer to 5%.

Faced with cash flow pressures, the company devised a “circular” approach: using money from new investors to fulfill lease payments it had promised to earlier investors. Internally, DC Solar employees allegedly referred to this patchwork as “re-renting,” but investigators later described it as classic Ponzi activity.

Fraudulent Tactics

To sustain the illusion, DC Solar:

Faked VINs: Employees scraped VIN stickers off certain generators and reapplied them onto others, matching whatever batch investors expected to see.
Synthetic Tracking: GPS transponders were buried in vacant fields so investors believed their units were deployed.
Paper Leases: Executives fabricated large, long-term leasing contracts with major telecom and entertainment companies, sometimes enlisting outside patsies to sign phony agreements in exchange for sizeable payouts.

Meanwhile, Carpoff and his wife, Paulette, enjoyed the spoils. They amassed a fleet of 149 classic cars—many of them gas-guzzling muscle cars, paradoxically funded by a “green energy” enterprise—purchased stakes in a Napa winery, rented private jets, and even sponsored a NASCAR race (the DC Solar 300). They also bought the Martinez Clippers, an independent league baseball team, and emblazoned their company parking spots with initials like “JMFC,” short for “Jeff Motherf***** Carpoff.”

The Whistleblower and the Raid

The scheme began to unravel when a DC Solar employee, Sebastian Giuliano, realized the company was paying old investors with new investor money and filed a whistleblower report to the SEC. Suspicions deepened when the IRS audited some of DC Solar’s earliest deals, concluding that the actual fair market value of each generator was around $13,000—far below the $150,000 asking price.

In December 2018, armed with information from the whistleblower and their own investigations, federal agents descended on DC Solar’s facilities and the Carpoff residence. They seized $1.7 million in cash from a safe, confiscated the entire muscle car collection, and gathered further evidence of fraud.

Aftermath and Sentencing

DC Solar collapsed into bankruptcy by early 2019, owing millions to creditors, NASCAR, racetracks, and various vendors. Major investors, including Berkshire Hathaway, announced the probable loss of hundreds of millions of dollars in invalidated tax credits.

Criminal charges soon followed. In 2020, Jeff Carpoff pleaded guilty to conspiracy to commit wire fraud and money laundering; he was sentenced to 30 years in prison. His wife, Paulette, received an 11-year prison term. Several other executives, including the CFO and outside conspirators who fabricated leases or faked verification reports, also received prison sentences ranging from three to eight years.

Lessons and Oversight Gaps

DC Solar’s downfall highlights several vulnerabilities in green energy tax credit oversight:

Physical Verification: Authorities relied too heavily on documents without insisting on direct, thorough inspections. Fake VINs and strategically placed GPS devices allowed DC Solar to fabricate nearly 11,000 nonexistent generators.
Valuation Transparency: Inflated price tags ($150k vs. $13k real value) went unchecked, maximizing undeserved credits.
Circular Financing Scrutiny: Leasing revenue was artificially maintained with new investor funds, a hallmark of Ponzi schemes, yet it initially escaped scrutiny.
Due Diligence and Audits: Complex alternative energy incentives require rigorous checks to confirm the actual equipment, usage, and economic substance of each deal.

For accountants, attorneys, and investors, the DC Solar saga is a sobering lesson. Fraudsters can exploit these incentives no matter how appealing a tax benefit or environmentally friendly pitch may sound. Robust financial controls, thorough audits, and consistent physical verifications are key to safeguarding genuine green energy efforts.

For a more in-depth exploration of DC Solar’s rise and fall—and the comedic twists along the way—listen to the Oh My Fraud podcast episode linked above. The story of DC Solar stands as a testament to how easily good intentions and generous credits can be warped into massive fraud when accountability is lax.

When Trust Turns Toxic: Inside the World of Pink Collar Crime

Earmark Team · February 2, 2025 ·

Could your most trusted employee be secretly siphoning company funds?

In a recent episode of the Oh My Fraud podcast, fraud investigator Kelly Paxton shares how seemingly reliable staff—often overlooked for potential misconduct—can exploit organizational blind spots.

According to the Bureau of Labor Statistics, nearly 90% of bookkeepers in the United States are women. While many people assume women are less likely to commit fraud, Paxton warns that it’s not gender but position and access that matter most. By trusting certain employees implicitly and failing to establish strong controls, businesses inadvertently cause serious financial losses.

As Paxton’s cases illustrate, ignoring stereotypes and adopting “trust but verify” strategies are crucial steps toward preventing fraud.

Kelly Paxton’s Path to Fraud Investigation

Kelly Paxton did not start out in law enforcement. She began her career in financial services as a commodities and bond trader. One day, a U.S. Customs agent called her brokerage firm asking about a suspicious client. Kelly alerted the agents, which led to a deeper conversation—and ultimately, a job offer. She joined U.S. Customs and conducted investigations into money laundering, narcotics, and other major crimes before moving into background checks for federal agencies.

Her investigative focus shifted when she joined a local sheriff’s office and noticed that nearly all the embezzlement suspects she encountered were women. Wanting to understand why, she discovered criminologist Kathleen Daly’s 1989 work referencing “pink collar crime,” a term describing embezzlement often perpetrated by those in bookkeeping or finance positions. Paxton’s takeaway: Access plus trust is the real key—90% of bookkeepers may be women, but it’s the opportunity that matters most.

Understanding Pink Collar Crime

Pink collar crime typically involves smaller amounts stolen over extended periods—fraudsters who make subtle “lifestyle” upgrades rather than lavish purchases. This can happen when the organization deeply trusts an employee. In many cases, they’re seen as family, invited into the home, and never suspected of wrongdoing. Victims are often embarrassed when they discover the truth and hesitate to report it—what Paxton calls “no victim shaming”: the more we shame victims, the less they come forward.

Key characteristics include:

Position-based access: Bookkeepers and finance staff control incoming or outgoing funds.
Incremental theft: A pattern of small transactions that grow larger over time.
Rationalization: Fraudsters may plan to “pay it back” but rarely do.
Deep trust: Employers assume loyal staff, especially women, “would never steal.”

When Pink Collar Crime Turns Deadly: “Red Collar” Cases

Most pink-collar crimes involve embezzlement without violence. However, some cases escalate to “red collar crime,” where financial fraud intersects with homicide. As Paxton explains, desperate fraudsters may resort to extreme measures when they fear exposure.

The Lori Isenberg Case

One chilling example is Lori Isenberg, a nonprofit executive director in Coeur d’Alene, Idaho. Her organization provided housing for low-income individuals—hardly the type of place where you’d suspect significant embezzlement. Yet over three years, Lori allegedly stole between $500,000 and $2.5 million by creating fake accounts, forging checks, and misusing her daughters’ and husband’s names.

When investigations closed in on her scheme, Lori took drastic action. In February 2018, on the same day local news broke a story about her suspected fraud, she took her husband out on a boat trip in the freezing Idaho winter. He mysteriously fell overboard and drowned. An autopsy revealed a lethal dose of Benadryl in his system. Lori claimed it was a suicide attempt gone wrong—an explanation contradicted by digital evidence showing she researched how to drug someone with Benadryl.

After disappearing for four months, Lori was eventually caught and accepted an Alford plea, which essentially concedes that a jury would likely find her guilty without formally admitting guilt. She received 30 years for second-degree murder, with an additional 5 years for her financial crimes, making it highly unlikely she will ever be released. The Lori Isenberg case underscores how far a fraudster might go to avoid being exposed—a stark reminder that misplaced trust and weak internal controls can have devastating consequences.

The Role of Trust, Bias, and Access

Society is conditioned to trust women—parents instruct children to seek a “nice lady” for help if they’re lost, for instance. This assumption carries over into workplaces, where female employees handling finances often face less scrutiny.

Paxton recalls her own days in U.S. Customs: “You put two women in a Honda Accord, and no one thinks anything is unusual. You put two men in a Ford Focus, and they’re pegged as cops.” Similarly, a “helpful bookkeeper” can escape suspicion for years.

What About Sentencing?

Sentencing for embezzlement and related fraud varies widely:

Federal Cases: They follow sentencing guidelines based on dollar amounts and other factors.
Local Cases: Judges can have broad discretion. Some jurisdictions impose tough sentences, while others might view fraud as a “civil matter,” limiting law enforcement intervention unless there are other serious elements (e.g., homicide).

This inconsistent approach can embolden perpetrators who believe they can dodge severe penalties—until a high-profile case, a dogged investigator, or a high-stakes victim (like a large corporation) brings full prosecution.

Avoiding Blind Spots: Trust but Verify

Rather than assuming anyone is “too nice” or “not smart enough” to steal, Kelly Paxton encourages businesses and nonprofits to focus on position-based controls:

Segregate Duties: Ensure no single person handles every financial task.
Surprise Audits: Don’t just check large transactions; occasionally review smaller ones.
Vendor Verification: Confirm that vendors and accounts are legitimate, especially if newly created.
Encourage Transparency: Cultivate a culture where employees and clients can report suspicious activity without fear.
No Victim Shaming: Publicizing embezzlement—when safe to do so—helps others learn and prevents repeat offenders from quietly moving on to the next company.

Learn More from Kelly Paxton

Kelly Paxton now hosts the Fraudish Podcast (formerly Great Women in Fraud), interviewing fraud investigators, victims, and even fraudsters themselves. She also covers topics like red-collar crime, employee embezzlement, and how biases impact investigations. Her new book, Embezzlement: How to Detect, Prevent, and Investigate Pink Collar Crime, is available on Amazon.

For a deeper look at Lori Isenberg’s story—and other fraud sagas—listen to the full episode of Oh My Fraud. You can also earn CPE credit by downloading the Earmark app and completing a short quiz related to the episode.

A Fresh Look at Accounting Firm Transitions Puts Quality of Life First

Earmark Team · February 2, 2025 ·

In a recent episode of the Who’s Really the Boss? podcast, attorney Sara Sharp joined hosts Rachel and Marcus Dillon to discuss the evolving world of accounting firm ownership, legal compliance, and how forward-thinking solutions like phantom equity can help firms thrive.

Sara, who works almost exclusively with CPAs on practice transitions and day-to-day compliance, sheds light on key issues every firm owner should consider—from multi-state employment laws to IRC Section 7216, which requires tax return preparers to protect clients’ tax return information or face possible criminal prosecution. Sara also discussed how creative ownership structures can bridge the gap between traditional partnerships and the need for modern flexibility.

From Compliance Challenges to Ownership Solutions

Rachel and Marcus initially engaged Sara to revisit the Dillon Business Advisors (DBA) employee handbook, recognizing that multi-state compliance for PTO and other policies was becoming increasingly complex. What started as a routine legal audit soon expanded into a broader conversation: How do small and mid-sized firms protect themselves legally while also planning for the future?

“A lot of people think signing up with a PEO solves everything,” explains Rachel, referencing how DBA initially assumed their Professional Employer Organization would handle compliance. “But we still discovered plenty of state-specific requirements.”

Sara points out that many accounting firms face challenges such as:

Multi-state labor laws require unique PTO accrual rules or payout stipulations
Contractor vs. employee misclassification can lead to costly fines
Sec. 7216 regulations mandate specific client consent forms when outsourcing tax prep or using contractors

Addressing these issues up front, says Sara, frees firms to focus on strategic goals like offering innovative ownership pathways.

Why Traditional Partnerships Feel Precarious

Despite the compliance work, most of Sara’s clients ultimately want guidance on ownership transitions, whether selling to a third party, merging with another practice, or rewarding top team members. She uses “one foot on the boat, one foot on the dock” to describe how many owners attempt to ease out of the business while transferring equity to new partners. This can create a drawn-out process where any sudden shift—divorce, health crisis, or relocation—throws everything off balance.

“You can set up a five-year partnership buy-in plan,” says Sara, “but if something goes wrong in year two, you’ve got a mess on your hands, with partial owners and complicated payouts.”

Phantom Equity: A Modern Alternative

At DBA, Marcus and Rachel wanted to recognize two key team members—Leslie Reeves, CPA and Amy McCarty, MBA—without forcing them to buy into a rapidly appreciating firm. “We’re not just talking about hours and ‘butts in seats,’” Marcus explains. “Leslie and Amy bring strategic value that far exceeds any traditional measure of partner track.”

The solution? A phantom equity plan. Sara helped them design an arrangement wherein these employees receive financial benefits tied to firm performance—just as if they owned a small percentage—but without actual stock in the company. They would still see real economic participation in a potential sale or buyout event.

“We’re going to treat you economically as though you are a 1% owner,” Sara notes, “but you’re not on the cap table. It’s simpler, and if someone leaves, they aren’t stuck with actual shares in the business.”

For Marcus and Rachel, this addresses talent retention—rewarding employees who already act like owners—and risk management: no messy buyouts if life circumstances change.

Evolving Valuations: From 1X Revenue to 8X SDE

Another factor driving new ownership models is how valuations have changed. Sara observes that many accounting firm owners still assume they’ll fetch about 1X gross revenue. Yet private equity, family offices, and younger entrepreneurs increasingly evaluate profitability. Instead of valuing a practice based on gross revenue, they’re basing it on earnings—often 4X to 8X seller discretionary earnings (SDE).

“Now that people realize it’s about cash flow, we see more sophisticated questions,” explains Sara. “Do you have digital relationships with clients? Are you reliant on face-to-face drop-offs? Efficient, profitable, tech-savvy firms can get premium multiples.”

Younger generations of accountants prioritize work-life balance and operational efficiency. They’re less inclined to log 70-hour weeks or maintain a physical office for clients to drop off paper forms. Sara says this cultural shift is clear in her legal practice:

“I’ve got buyers in their 20s and 30s who want to do everything in the cloud, automate workflows, and raise rates so they don’t have to manage thousands of low-margin returns. They’re running the business more cleverly.”

Looking Ahead: Aligning Compliance, Culture, and Ownership

As more firm owners realize they must adapt to multi-state employment, shifting professional values, and new valuation formulas, legal compliance and innovative ownership structures become intertwined. Whether ensuring your employee handbook meets Colorado PTO law or sending out proper Sec. 7216 disclosure forms, or designing phantom equity plans, the best solutions are protective and empowering.

“Firms want to preserve culture, recognize talent, and plan for what’s next,” says Sara. “But you can’t marry that boy just to keep from hurting his feelings,” she quips, invoking her mother’s advice on knowing when to walk away from a bad deal—or a rigid tradition that no longer fits.

By balancing compliance groundwork with creative reward systems, forward-thinking firms can attract and retain top talent, command higher valuations, and sleep peacefully at night, knowing they’ve protected themselves and their employees.

To hear more about Sara Sharp’s legal insights and how DBA structured its phantom equity plan, listen to the full episode of Who’s Really the Boss? podcast.