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Limited Liability Partnership in India: Mandatory Compliances

Sonal Pruthi

| Updated: Jan 14, 2021 | Category: Annual Compliance

Mandatory Annual Compliance for LLP in India

Limited Liability Partnership in India, is the one which is registered under the LLP Act, 2008. The Limited Liability Partnership registration means an entity which is a mixture of Partnership and a company. In this article, we are explaining Mandatory Compliance for LLP.

LLP is a separate legal entity which is registered under the Ministry of Corporate Affairs of India. The minimum numbers of partners required is two to start an LLP. The mandatory compliance requirement is that amongst the two partners,’ one must be Indian Citizen. It is the responsibility of partners in LLP to do proper maintenance of the books of accounts, doing compliance for LLP like filing of income tax returns, and filing of annual return with the Ministry of Corporate Affairs[1].

Advantages of LLP

  1. No personal liability

One partner is not responsible for the conducts of the other partner. Also, the LLP does not carry personal liability.

  1. Limited Liability Protection

The LLP gives protection like a company to its partners. As the partners have separate from the company.

  1. Raising Funds

The LLP can raise funds from different sources like Banks and NBFC.

  1. No limit on maximum partners

The LLP can fill any number of partners, as there is no limit given.

Benefits of Annual Compliances for LLP

Benefits of Annual Compliances for LLP
  1. Increases market Credibility

The purpose of the Annual Compliance of LLP is to raise its market credibility. The status of annual filing is displayed at the Master Data of the LLP on the MCA Portal. The data is accessible to any person, and it can be used for loan approvals or other similar requirements. The compliance for LLP is the primary criterion for improving the credit score of the organization.

  1. True Value of Finances of LLP

Every person or company entering into the contract with an LLP would like to measure the financial worthiness of the LLP. The contracts entered by the LLP are accessible by every person. LLP Annual filing provides the annual financial worth of the company and its capacity to the other party.

  1. Avoid Penalties

The annual compliance for an LLP is important, as non-filing attracts the penalties. The LLP who are frequently defaulting in the yearly filing of Returns will receive the status of the defaulter or defunct. The partners will be declared defaulters and will be disqualified from the other appointments.
Regular filing saves the LLP from the hefty fines or penalties and disqualification.

  1. Conversion of LLP into different forms

For conversion of LLP into any other type or format of company, annual filing is essential. The regular compliance for LLP keeps a track and records the conversion process with ease (if LLP converts). The same applies, in the case of, closure of an LLP. If the LLP becomes non-operational, the LLP’S are asked to do compliance procedures.

Mandatory Compliances for an LLP

The LLP’s who are registered under the Ministry of Corporate Affairs, according to Limited Liability Partnership Registration procedure defined in the LLP Act, 2008; have to undergo mandatory compliances such as:

  1. Filing of Return- Form-11
  2. Filing of Statement of Accounts & Solvency – Form-8
  3. Filing of Income Tax Reruns
  4. Maintenance of Books of Accounts
S.No.E-FormDue Dates
 1.FORM-11That within 60 days of the Closure of Financial Year, the form must be submitted
 2.FORM-8On or Before 30th October Every Year
S.No.Income Tax ReturnsDue Dates
 1.In case of Audit is not required for the statement of accounts31st July, every year
2.In case of Audit is required for the statement of accounts30th September  every year
 3.LLP involved in the International Transaction30th November every year
Mandatory Compliances for an LLP

A. Filing of LLP Annual Return

  • The filing of LLP Annual return under Form-11 is mandatory compliance for LLP.
  • It is a form where the summary of LLP’s partners’ information or contribution of capital by the partners, which indicates the change in management if done.
  • The form is required to be filled with the Registrar within 60 days of the closure of financial year, that is, it has to be filed on or before 30th May every year.

B. Filing of Statement of Accounts and Solvency

  • It is the filing of Statement of Accounts and Solvency under Form-8.
  • It is required that LLP must maintain the books of accounts; the accounting can be either on a cash or accrual basis.
  • The statement of solvency is to be prepared every year ending-31st March.
  • Every year on or before 30th October LLP Form-8 should be filled with the Registrar of Companies (ROC).
  • The annual turnover of the LLP if increases to 40 lakhs or where the partner’s obligation of contribution exceeds, 25 lakhs. The partner needs to get their accounts audited by the auditor of LLP.

C.  Filing of Income Tax Return

  • This Income Tax Return is to be filled in the Form of ITR-5.
  • It is compulsory for the LLP to file the return of income electronically, using a digital signature.
  • After auditing the requisite accounts of the LLP.

D. Maintenance of Books of Accounts

  • Every year before 31st March, the books of accounts are to be made.
  • The accounts have to be presented at the registered office as when needed.
  • When the annual turnover of the LLP increases to 40 lakhs, the accounts must be audited by the Charted Accountant.
  • The compliance for LLP that is maintaining books of accounts is essential. As, on the non- furnishing of books of accounts, it attracts penalty, of Rupees 25,000 to 5, 00,000/-.
  • The designated partner could be penalized for Rupees 10,000 to Rupees 1 Lakh for non-acquiescence.

Conclusion

It can be well concluded that Limited Liability Partnership Registration as a form of organization, brings with it the compliances for an LLP, which needs to be duly fulfilled. The non-fulfillment will attract penalties and fines on the directors or partners. It keeps track of record with the MCA when compliances are duly filled by the LLP. It not only increases their credibility but attracts the investors with them too.

Read our article:An Overview on Annual Filing of LLP

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Sonal Pruthi

She is B.Com (H), LL.B LLM, Cs (Module 2) And Certification In Cyber Law From ILI Qualified. She has Been A Legal Teacher In The Previous Organization. My Strength Is My Expertise Knowledge In Civil Laws, Corporate Law And Tax Laws. I Have Been Legal Teacher And Legal Trainer In The Past Organization. Her Knowledge About The Subjects Have Expanded Due To Teaching Number Students From Various Universities All Over India.

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