Alternative Practice Structures and Private Equity
Private equity is a growing trend for accounting firms internationally, with firms in the United States and the United Kingdom proposing alternative practice structures to facilitate private equity investment to raise equity capital to expand or invest in their businesses.
Firms are reminded of the registration requirements in Ontario that do not permit private equity structures. Regulations in the United States and the United Kingdom require audit firms to be majority controlled by CPAs. In Ontario, regulations require 100% CPA ownership as detailed below.
All firms in Ontario providing accounting services to the public, or engaged in the practice of public accounting, are required to register with CPA Ontario and only the following corporate structures are permitted:
- sole proprietorship
- general partnership
- limited liability partnership
- professional corporation
In addition, all partners or shareholders must be CPA Ontario members as per the Partnerships Act, R.S.O. 1990, the Business Corporations Act, 1990 and the Chartered Professional Accountants of Ontario Act, 2017.
Where alternative practice structures are being considered, it is also important to note that in addition to the above, no Member or Student can engage in the practice of public accounting or in providing accounting services to the public except through a Firm that is registered with CPA Ontario.
Furthermore, members should consult the CPA Code of Professional Conduct when assessing alternative practice structures for restrictions and rules surrounding association with unregistered entities as a means to facilitate private investment.
Often, services to be provided through these entities would still be seen to fall within the definition of providing accounting services to the public, and therefore if Members are associated with these activities, it can only be through a firm registered with CPA Ontario.
If you have any further questions about CPA Ontario’s Firm Registration Requirements, please contact the Registrar’s Office.