Practice within a partnership or a joint-stock company
CPAs wishing to offer services to the public related to the CPA profession as set out in section 4 of the Chartered Professional Accountants Act within a limited liability partnership (LLP) or a joint-stock company (JSC) must first inform the Order and fill out a declaration of information.
They must also comply with the Regulation respecting the practice of the chartered professional accountancy profession within a partnership or a joint-stock company. Under this Regulation, CPAs are authorized to practice their profession within a limited liability partnership (LLP) or a joint-stock company (JSC) provided certain conditions are met. The Regulation also stipulates that certain people may become partners, shareholders, or directors of such LLPs and JSCs even if they are not members of the Order or of any other professional order of CPAs, CAs, CGAs, or CMAs in a Canadian province or territory.
However, CPAs must control the partnerships or joint-stock companies that present themselves as CPA partnerships or companies or that offer assurance services such as audits, reviews and special reports. Other types of partnerships or companies in which CPAs practice their professional activities may be controlled by members of a professional order or the equivalent listed in section 2 of the Regulation.
CPAs are not required to practice the profession within a limited liability partnership or joint-stock company. They may also practice for their own account or within a general partnership (GP) or an undeclared partnership. In this case, CPAs must inform the Order in writing before opening a new office. For more information, refer to the Opening/Spin-off/Merger of a firm section.
Pursuant to section 9 of the Code of ethics of chartered professional accountants, CPAs wishing to practice within a general partnership or an undeclared partnership of which not all partners are members of the Order are also subject to the Regulation. However, for these types of partnerships, excess professional liability insurance is not mandatory.
In addition to the obligation of all CPAs to enroll in the basic group professional liability insurance plan, sections 11 to 13 of the Regulation respecting the practice of the chartered professional accountancy profession within a partnership or a joint-stock company require members practicing within a limited liability partnership or joint-stock company to take out excess liability insurance on behalf of the organization.
This insurance, with coverage varying between $500,000 and $1,000,000 depending on the structure of the partnership or joint-stock company, covers possible professional faults and, as with the basic professional liability insurance for all CPAs, must be maintained for five years after the partnership or joint-stock company ceases operations.
Therefore, the coverage must provide for an undertaking that such coverage will apply to all claims submitted in the five years following the period of coverage during which a member of the partnership or joint-stock company dies, withdraws from the partnership or joint-stock company, or ceases to be a member of the Order, so as to maintain coverage for liabilities of the partnership or joint-stock company arising from fault or negligence on the part of a member in the practice of the profession within such partnership or joint-stock company.
The practice of the profession within a partnership or joint-stock company does not limit the obligations arising from the professional’s own fault. Section 21 of the Code of ethics stipulates that members of the Order who perform a contract in the practice of their profession assume full liability arising therefrom.
This section also prohibits Order members from including in such contract (e.g. an engagement letter) any clause directly or indirectly limiting their liability or invoking the liability of the partnership or company as a ground for limiting their own liability.
The professional liability of members of professional orders who practice their profession within a limited liability partnership (LLP) or joint-stock company (JSC) is limited to professional acts they carry out personally and acts performed by persons they supervise or control. Within a JSC or LLP, shareholder members are not solidarily liable for professional acts engaged in by their partners or shareholders if it is proven that they did not participate in those acts.
This is not the case with general partnerships, where partner or shareholder members can be held solidarily liable for the professional acts engaged in by all partners and shareholders.
If you have any questions regarding practicing the CPA profession within a partnership or a joint-stock company, please contact us by email at firstname.lastname@example.org.