Annual Compliance of LLP

Annual Compliance of LLP
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Annual Compliance of LLP

Annual Compliance for LLP Company

A Limited Liability Partnership or LLP is a legal entity that incorporates the goodness of a partnership firm and a corporation. In this type of partnership, the partners have limited liabilities which mean that the partners are not required to pay off the debts of the company using their personal assets and at the same time, the individual partners are not responsible for another partner’s misconduct or negligence.

An LLP is required to be registered under the Limited Liability Partnership Act, 2008.

Benefits of LLP Annual Compliance

The following benefits can be achieved by complying with the relevant regulatory requirements of the business:


Benefits of LLP Annual Compliance

Reputation-

By complying with the requirements of the Registrar of Companies and the Ministry of Corporate Affairs, the LLP and partners will increase their reputation in the eyes of the public. Through this process an LLP can increase its compliance requirements. More investors would be willing to invest in an LLP that complies with the requirements of the law.

Compliance-

By filing all compliances within a particular period of time, the LLP would be free from any form of compliance requirements. By considering this, an LLP can fulfil its objectives.

Less Burdens-

By complying with the requirements of the authorities, the LLPs would face lesser burden when it comes to compliance requirements. If compliances are not followed up or filed by the LLP, it can be detrimental to the development of the LLP. Hence it is crucial that all the requirements related to compliance are followed by the partners of the LLP.

Foreign Direct Investment-

The Government of India have recently brought out guidelines for FDI in LLPs. Foreign direct investment is a form of direct investment or indirect investment by a foreign company in the shares or capital structure of an Indian entity. By complying with the requirements of the authorities, foreign investors are more likely to invest in LLPs. Investment through FDI in an LLP can occur through the automatic route and the approval route. Through such investment the LLP can increase the amount of capital.

Hence it is suitable for LLPs to consider all the requirements related to annual compliance.

Requirements for LLP Annual Compliance

Requirements for LLP Annual Compliance

LLP Annual Compliance

A. Filing of the Statement of Account & Solvency:

  • Fill up in the prescribed format as per LLP Form 8
  • It is compulsory for all LLPs to maintain the Book of Accounts as per Double Entry method.  Form 8 contains a declaration on the solvency state of the LLP by its designated partners as well as gives details of the statement of assets and liabilities and statement of income and expenditure of the LLP.
  • The form 8 needs to be signed by the partners and requires to be certified by a practicing chartered accountant, company secretary or cost accountant.
  • This is required to be filed within 30 days from the end of six months of the close of the financial year that is by 30th October of each financial year.
  • LLPs with a turnover of more than Rs. 40 lakh or the ones with the contribution of more than Rs. 25 lakh need to get their books of accounts audited by an active chartered accountant.

B. Annual Return Filing

  • The return needs to be filed with the Registrar of Companies.
  • Fill up using the prescribed format - LLP Form 11
  • This is required to be filed within 60 days from the close of the financial year, in other words by 30th May of each year.

C. Filing of Income Tax Return

  • LLPs are required to file their income tax return using Form ITR 5 – it can be downloaded or filed online using the digital signature of the designated partners.
  • As per the Income Tax Act, all LLPs are required to close their financial year by the 31st of March and accordingly file the returns with the IT Department.
  • LLPs with an annual turnover of more than Rs. 60 lakh need to get their books audited and file their return latest by 30th September every year.
  • LLPs whose accounts are not required to be audited need to file their returns latest by 31st July each year.
  • LLPs that have got engaged in international transactions or have undertaken specific domestic transactions have to file Form 3CEB. The form needs to be certified by a qualified chartered accountant and is to be submitted by 30th November of each year.

D. MCA and ROC Compliance

  • Partners have to contribute equally as per the requirements of the LLP agreement. Such provisions are present under the Limited Liability Partnership Act, 2008. Every Partner is required to equally contribute.
  • LLPs are also required to maintain their books of accounts as per the requirements of the MCA and ROC.
  • Compliance with the requirements of the Limited Liability Partnership Act, 2008

Penalty Provisions

For MCA Filings:

As per the Limited Liability Partnership Act, 2008 filing of Form 8 and Form 11 is a mandatory requirement for every registered LLP. Non-compliance with the LLP annual compliance leads to a penalty. The penalty amount is. 100 per day for every form not filed. No upper ceiling is specified for such penalty amount.

For Income Tax Filings:

The penalty for defaulting on the filing of Income Tax returns on time is two-fold – Rs. 5000 is to be paid by defaulters who miss the filing due date but do so before 31st December of each year. Rs. 10000 is payable by LLPs that fail to stick to the extended deadline.

After Incorporation Compliances

Apart from the LLP annual compliance, there are certain one-time compliances. Once an LLP has been registered it is required to comply with certain requirements, as follows:-

  • It is compulsory for the LLP to execute and file the LLP Agreement as per Section 2(O) & (q), 22 and 23 of the LLP Act, 2008 within 30 days of the formation with the Ministry of Corporate Affairs. The Agreement typically mentions the rights and duties of the partners and the LLP.

    As per the LLP Act, in case an Agreement is not filed, the mutual rights and liabilities shall be as per Schedule I to the Act. Hence if an LLP wishes to exclude provisions or requirements of Schedule I to the Act, it needs to have an LLP Agreement executed and filed specifically excluding the applicability of any or all provisions of Schedule I.

    Penalty: Failure to file the Agreement within the stipulated period is liable to be fined at the rate of Rs. 100 per day of default with no upper limit to it.

  • Other than the above, the LLP is required to apply for the LLP PAN and TAN
  • Open LLP Bank Account
  • Purchase the LLP seal and have LLP stationery prepared post incorporation.

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Frequently Asked Questions

Yes annual compliance is mandatory require for all LLPs in India. If a LLP does not comply with the above requirements, then they are liable to pay penalties imposed by the government. Hence annual compliance is a requirement for all Limited liability partnerships in India.

MCA and ROC are specific compliance requirements which have to be carried out by LLPs.

MCA is an abbreviation for the Ministry of Corporate Affairs. This registry looks into the compliance requirements for LLPs in India.

ROC is an abbreviation for Registrar of Companies. This form of compliance has to be carried out either quarterly , half yearly or annually.

The LLP has to comply with the rules and provisions of the limited liability partnerships act, 2008. All compliance requirements have to be followed by an LLP.

Yes there are compliance requirements related to the change in partners of an LLP.

E-Form 4 is required to be submitted to the ROC within 30 days if there is any form of change in the partnership requirements of the LLP.

E-Form 3 also must be submitted to the ROC. This form relates to any rights and duties related to the partnership concern.

When an LLP is formed or established, it is mandatory for an LLP to recruit a certified chartered accountant. Apart from this all forms related to the audit must be submitted as required.

Yes all the documents related to incorporation must be available for inspection in the registrar’s office. The following documents must be present in the registrar:

• LLP incorporation documents

• LLP Agreement

• Annual Returns of the Partnership

• Audited Accounts

Yes the LLP is required to submit the annual return. Such annual return must be submitted through e-form 11. Such requirements have to be carried out by the LLP within a period of 60 days to the ROC.

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