In India, the CAs working in the domestic audit firms cannot work as partners in the Big Four firms. Employment and independent practice are the two routes with the same destination for a CA professional. ICAI and MCA are changing the guidelines to the LLP Act to make domestic CA firms global and competent. LLP act says that the companies working for foreign companies must have the registration as LLP. Foreign companies with partnerships can work in India as LLPs with digital signatures and DIN. LLP model companies must do statutory audits irrespective of the turnover. The blog sheds light on the LLP Act and the proposal of MCA to bring changes. The partnership and global projects contribute to the growth of the Indian CA firms. The proposed change in the legal structure of domestic CA firms increases the opportunity for partnerships and foreign assignments.
MCA and ICAI have plans to make legal changes in the LLP CA firms. The reason for changing the domestic CA firms to LLP is to enhance the global opportunities in domestic CA firms. Domestic firms operate with limitations as they cannot certify the returns and give audit reports to foreign companies. The ICAI has plans to introduce networking guidelines for the Indian CA firms to collaborate and expand the opportunities. Working for overseas companies increases the revenue and experience of the Indian CA firms.
What is the difference between a company and a firm?
A firm is a group of experts offering services or selling products with multiple locations. The firms have the same owners and the same employer identification number. Examples of firms are law firms, accounting firms, auditing firms, consulting businesses, and graphic design firms.
The company is a group of people with a commercial motto and engage in profit-generating activity. A company can offer services or sell products. The three types of companies are corporations, limited liability companies and sole proprietorships. Each structure has unique tax advantages. Examples of companies are one-person companies, public limited companies and private limited firms. The Indian Revenue Service Department has more interest in companies than firms. Companies are incorporated to generate revenue. Firms are incorporated to offer professional services.
Network of domestic firms:
Domestic CA firms and LLP firms have different legal structures. LLP provides the benefit of enjoying the partnership with limited liability and tax benefits. LLP protects the personal assets of the partners. The business liability is shared and protected in the LLP structure. The LLP separates and relates the business liability according to the partner’s investment. CA firms and chartered accountants do employment or practice according to their interests. The chartered accountants opting for practice happen to work in partnership to get more clients and revenue. The auditors work on a rotational basis. The auditors work for domestic and overseas clients. The client base and experience are the two pillars of the CA firms. Gaining different types of clients and getting exposure to the risk factors in diverse industries adds value to CA firms. Chartered accountants do their job thinking about the monetary benefits and plans. Chartered accountants doing business are focused towards client acquisition, practical experience and risk assessment.
Network of LLP firms:
In LLP structure one partner is in India and the other partner is in a foreign country. In the LLP structure, the partnership can be with two or more persons. E-form one of LLP is the reservation of name, and e-form two of LLP is the details and consent of the partners. E-form three of LLP is the LLP agreement. The company must register the LLP agreement within thirty days of incorporation. LLP act says that the domestic firms getting converted as LLP must submit forms 17, 18 and 2. Private and unlisted companies can transform the structure as LLP. The listed companies cannot transform the legal structure as LLP. The partners of the LLP must inform the change in the personal details like name or address to the registrar. Form four is for declaring the changes. The partner of the company must intimate the registrar within fifteen days.
MCA and ICAI bring changes in domestic CA firms:
ICAI wants to make maximum use of the skilled workforce in India and grow with combined strength. The following points are worth reading to understand the proposal of ICAI and the committee for aggregation of CA firms.
The committee for aggregation of CA firms say that the CA firms with more than 50 per cent partners as registered CA can transform the company as LLP. Domestic firms with more than fifty per cent of CA can join an existing performing LLP firm as a partner.
The firms associated with LLP must submit a written deed. The deed helps domestic firms to practise independently and jointly.
In the proposed model, the firm incorporated under the Companies Act is not eligible to change as an LLP firm.
The proposal also emphasises that the partner firm must include the details of the LLP firm in the stationeries like profiles and visiting cards. Similarly, the LLP firm also must include the details of the partnered domestic firm in the stationery and social profile.
ICAI has plans to introduce a grievance redressed cell under the student’s services directorate and members to attend to the queries related to the LLP firm network. The cell resolves the issues in the new LLP model firms.
In the new model, the incorporated firm gets the support of government agencies like RBI and NABARD depending upon the geographical presence and combined strength.
In the current guidelines of networking of Indian CA firms 2021, the three models of domestic networking are different firms with a new name and practice independently, different firms with a new name and practice in the common lead network, and different firms with new names and practices in their names.
Final words:
MCA and ICAI are changing some points in the LLP act to benefit the professionals. Chartered accountants working independently and forming a professional network in India contribute to economic growth. The development of domestic CA firms increases the investments, profits and growth.
