Annual Compliance of LLP

What is a Limited Liability Partnership?

Limited Liability Partnership (LLP) is a corporate business that gives the benefits of limited liability of a company and the flexibility of a partnership. The partners have limited liabilities in a LLP, which means that the partners are not obliged to set off the debts of the company using their personal assets. Also, the individual partners are not responsible for misconduct or negligence of another partner.

A Limited Liability Partnership is obliged to be registered under the LLP Act, 2008.

What are the requirements for LLP Annual Compliance?

A LLP must follow their financial year from 1st April to 31st March. Even if there is no business activity, the LLP annual compliance has to be met by each and every registered LLP. As a matter of fact, Annual Compliance are required to be fulfilled even if LLP has been shut down, whether the bank account of the business is in operation or not. LLP annual compliance has to be met on a mandatory basis, irrespective of the mentioned above cases.

What is Annual Compliance of LLP?

1. Filing of the Statement of Account and Solvency with following instructions:

  • Fill up the fields in the prescribed format as per LLP Form 8
  • Book of Accounts are to be maintained as per Double Entry method for all LLPs. Form 8 consists information regarding solvency state of the LLP by its designated partners as well as it gives details of Balance Sheet and Financial Statement of the LLP.
  • Form 8 must be signed by the partners and then be certified by an active Chartered Accountant, Company Secretary or Cost Accountant.
  • This is required to be filed within thirty days from the end of six months of the close of the financial year, that is, by the end of October of each financial year.
  • Limited Liability Partnerships having turnover of more than INR 40 lacs or the ones with the contribution of more than INR 25 lacs need to get their books of accounts audited by a practicing Chartered Accountant.

2. Filing of Annual Return:

  • The return needs to be filed with the Registrar of Companies (ROC).
  • Fill up in the given format in LLP Form 11
  • The above is required to be filed by the end of May each year, that is, within sixty days from the close of the financial year.

3. Income Tax Return Filing:

  • Limited Liability Partnerships (LLPs) are needed to file their income tax return using Form ITR 5, which can be downloaded offline or filed online. For online filing, digital signature of the designated partners is required.
  • Complying with Income Tax Act, all LLPs are needed to close their financial year by the end of March and file their returns with the IT Department accordingly.
  • LLPs with an annual turnover of more than INR 60 lacs need to file their return latest by the end of September every year and get their books audited.
  • LLPs with accounts that are not to be audited need to file their returns latest by the end of July each year.
  • LLPs that do international transactions or have undertaken specific domestic transactions have to file a Form 3CEB. This form needs to be certified by a chartered accountant and is to be submitted by the end November each year.

What are the Penalty Provisions?

Penalty for Ministry of Corporate Affairs Filings:

According to the Limited Liability Partnership Act, 2008, every registered LLP needs to do filing of Form 8 and Form 11. A penalty is levied upon the Non-compliance with the LLP annual compliance. For each form not filed, an amount of penalty is INR 100 per day. There are no upper ceiling specified for such penalty amount.

Penalty for Income Tax Filings:

The penalty for defaulting on the filing of Income Tax returns on time is two-fold:

  • INR 5000 is payable by the defaulters who forget the filing due date but file before 31st December of each year.
  • INR 10000 is payable by LLPs that cross the extended deadline.

Compliances After Incorporation

There are certain one-time compliances apart from the LLP annual compliance. Once a LLP is registered, it is required to comply with certain requirements as mentioned below:-

It is mandatory for the Limited Liability Partnership to file the LLP Agreement as per Section 2(O) & (q), 22 and 23 of the LLP Act, 2008 within thirty days of the incorporation with the MCA. The rights and responsibilities of the LLP and partners are mentioned in the LLP Agreement.

The mutual rights and liabilities shall be according to Schedule I to the LLP Act in case an Agreement is not filed. Therefore, executed LLP Agreement is required to be filed excluding the applicability of any or all provisions of Schedule I where a LLP wants to exclude provisions or requirements of Schedule I to the Act.

Penalty: The LLP is liable to pay, on the failure of filing the Agreement within the given time, a fine of INR 100 per day with no upper limit to it.

  • The LLP is also required to apply for the LLP, PAN and TAN
  • LLP Bank Account to be opened
  • LLP seal to be bought and LLP stationery to be prepared post incorporation.