LLP and CS CA CWAs
Posted on 21-10-2015
LLP & CS/CA/CWAs
In India professionals like the Chartered Accountants (CA), Company Secretaries (CS) ,Cost Accountants(CWA) and Advocates are allowed to practice their profession under partnership but they can enter into partnership with their own professional colleagues only. For instance, a CS partnership can have only CS as its partners; moreover they cannot practice their profession under Company form of business organization. The restriction on entering into partnership with professionals of other discipline is one of biggest reason for slow development of the profession and biggest obstacle in realizing the synergies of different professional expertise.
Even in case of partnership, the maximum number of persons, which can be made as partners, is restricted to 20, which severely restricts the scope of business and future expansion plans.
With the notification of Limited Liability Partnership Act, 2008, the Government of India has introduced the concept of Limited Liability Partnership (LLP) in India.
A Limited Liability Partnership is a hybrid of existing partnership firms and full-fledged Companies. A minimum of two partners are required for formation of an LLP. Besides, there is no limit on the maximum number of partners, unlike the current limit of 20 members in a partnership firm.
The concept of LLP offers great opportunity to professionals like CA/CS/CWA/Advocates to develop, as now they can enter into partnerships with professionals of different disciplines for instance, a CS can enter into partnership with CA. A LLP as a business organization for professionals offers following advantages:
No Limit on maximum number of partners, can have partners all round the globe
Can enter into partnership with professionals of other disciplines
Limited Liability except in case of fraud
Not liable for acts of other partners
No exposure to personal assets
LLP will be treated as Body Corporate and shall have perpetual succession
Joining & Cessation of partners, will not lead to dissolution of the firm.
More creditworthiness than partnership
LLP is already a renowned business organization worldwide and most of big professional firms like PWC, E & Y etc. are registered in form of LLP.
In case of Professional LLP, the major issues to be considered is whether these are allowed to render audit and certification services. As in case of partnership, there is no separate identity between the partnership firm and the partner and therefore , for example while signing the audited balance of any company, the partner signing is personally responsible but in case of LLP, since there exist separate identity and partners would be doing all acts on behalf of the LLP, therefore they would not be personally liable for their wrong done and consequently will not be rendering efficient services.
Therefore it would take time, before professionals like CA/CS etc can form and start practicing under multi disciplinary LLP’s as their regulators — Institute of Chartered Accountants of India (ICAI) and Institute of Company Secretaries of India (ICSI) have yet not recognized LLP as form of business and amended their regulations.
The Institute of Cost & work Accountants of India has issued the necessary notifications (subject to approval of Central Government) for the amendment of their regulation , granting permission to Cost & Work Accountants to enter into partnerships with other professionals also.