LLP Compliance

A Limited Liability Partnership (LLP) is a distinct legal entity registered with the Ministry of Corporate Affairs (MCA) in India. To establish an LLP, a minimum of two partners is required, with at least one being an Indian citizen and resident. The partners bear the responsibility of maintaining accurate bookkeeping, filing income tax returns, and submitting an annual return to the MCA each financial year.

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    All Limited Liability Partnerships (LLPs) registered with the Ministry of Corporate Affairs (MCA) are required to submit a statement of accounts and annual returns for each financial year. Regardless of whether the LLP has conducted business or generated profits, filing a return remains obligatory.

    There are three essential compliance requirements for LLP owners:

    • Filing of annual returns
    • Maintenance of books of accounts
    • Submission of income tax returns

    Annual Return Submission for LLPs

    Every financial year, an LLP is required to submit two types of MCA annual returns, namely Form 8 and Form 11.

    There are three essential compliance requirements for LLP owners:

    Form 8: Form 8 needs to be submitted within 30 days from the conclusion of six months of the financial year, accompanied by the specified fee. This submission requires digital signatures from two designated partners and certification from a chartered accountant, company secretary, or cost accountant. Form 8 comprises two parts:

    • Part A: Statement of Solvency
    • Part B: Statement of Accounts, Statement of Income & Expenditure

    Failure to file this form incurs a penalty of Rs. 100 per day until compliance is achieved.

    Form 11: Form 11 includes information on the number of partners, total partner count, total contribution from all partners, details of corporate bodies as partners, and a summary of partners. All LLPs are obligated to file this form within 60 days from the conclusion of the financial year, along with the prescribed fee. Consequently, the due date for filing LLP Form 11 is the 30th of May each year.

    An LLP cannot undergo winding up or closure until all annual returns are submitted. Therefore, it is crucial to file the LLP Annual Return on or before the due date to avoid penalties.

    Income Tax Filing

    Limited Liability Partnerships (LLPs) engaged in international transactions, necessitating the filing of Form 3CEB, are required to complete their tax filings by the 30th of November. For income tax returns, LLPs should utilize Form ITR 5 and submit it online through the income tax website, utilizing the digital signature of the designated partner. Tax payments for LLPs can be facilitated either through physical mode at selected banks or through the e-payment option.

    Books of Accounts

    Regarding Books of Accounts, all LLPs are mandated to maintain accurate records on either a cash basis or accrual basis. Annually, prior to the 31st of March, the report must be appropriately submitted when requested. The accounting books need to be made available at the registered office as and when required. In instances where LLPs have a turnover exceeding ₹40 lakhs or capital exceeding ₹25 lakhs, the accounts are subject to audit by a chartered accountant.

    Document Maintenance for LLPs

    LLPs must keep their incorporation document, partner names and modifications, evidence of fee payment, statement of account and solvency, and filed annual return at the registered office with the Registrar.

    Advantages of Limited Liability Partnership (LLP)

    • In an LLP, one partner is not held accountable for the misconduct or negligence of another partner.
    • Partners have the authority to directly manage the business.
    • LLP offers limited liability protection for its owners.
    • If the number of partners falls below 2, a sole partner can seek a replacement without dissolving the LLP.
    • Following incorporation, an LLP can have an unlimited number of partners.
    • In the case of a single partner in an LLP, there is flexibility to find a new partner without the need for LLP dissolution.
    • LLP is recognized as a distinct legal entity.
    • Assets and liabilities of LLP are separate from those of the promoters.

    An LLP has the capability to secure funds from partners, banks, and NBFCs.

    Penalties for Non-Compliance

    Failure to submit LLP Forms 8 and 11 on time incurs a penalty of Rs. 100 per day of default. Closing or winding up an LLP is not possible without filing Annual Accounts. Non-compliance with any mandatory requirement may result in substantial penalties.

    Amendments to Limited Liability Partnership Rules in 2022

    The LLP (Second Amendment) Rule, 2022 introduces significant changes, including:

    The allowance for 5 Designated Partners (without requiring DIN) during incorporation, up from the previous limit of 2.
    All LLP forms are now accessible through web-based platforms.
    LLPs will receive their PAN and TAN along with the Certificate of Incorporation.
    The Statement of Account and Solvency will be endorsed by an interim resolution professional on behalf of the LLP.
    A web-based Form 9 will be provided for filing the Consent of Partners.

    Sadique and Ameen Associates specialize in delivering thorough services for Limited Liability Partnerships (LLPs). From inception to detailed compliance oversight, our taxation firm ensures smooth operations. Our expert team adeptly manages intricacies related to annual returns, income tax filings, and document maintenance, shielding against penalties. Recent 2022 amendments underscore our commitment to staying informed about regulatory changes. Choose for Sadique and Ameen Associates for adept guidance in optimizing LLP benefits and securing financial resources through careful fund management strategies.

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