LLP Compliance
A Limited Liability Partnership (LLP) is a business entity that combines the characteristics of a company and a partnership firm. LLPs are regulated by the Registrar of Companies of the Ministry of Corporate Affairs. An LLP is a perpetual succession legal entity that is distinct from its partners. The following are the primary benefits and powers of LLPs:
- Buying, selling, and holding of movable, immovable, tangible, or intangible assets.
- Power to sue and be sued.
- Separate legal entities.
- Power to employ people.
- Power to open a bank account.
- The power to engage in all forms of legal agreements.
All limited liability partnerships (LLPs) must submit specific statutory filings to the government annually in accordance with their authority. This article examines the primary compliance requirements of an LLP.
Books of Account
Each year, all LLPs are required to maintain accurate books of account on a cash or accrual basis. The registered office needs to employ a double-entry accounting system to maintain the book of accounts. A Chartered Accountant needs to audit the accounts of LLPs with a turnover exceeding Rs. 40 lakhs or a capital exceeding Rs. 25 lakhs.
Any LLP that violates the Act’s provisions faces a fine of at least Rs. 25,000 and up to Rs. 5,00,000. In addition, penalties for noncompliance could subject the designated partner to fines ranging from Rs. 10,000 to Rs. 1,00,000.
Annual Return Filing
Two forms of MCA annual returns, Form 8 and Form 11, are required to be submitted by an LLP each financial year.
Form 8
You are required to submit Form 8 and a prescribed fee within 30 days of the financial year’s end. This must be signed digitally by two designated partners, and it must be certified by a chartered accountant, company secretary, or cost accountant. Form 8 consists of two key components:
- Part A: Statement of Solvency
- Part B: Statement of Accounts, Statement of Income, and Statement of Expenditure
If you fail to fill out this form, you will be fined Rs. 100 per day until it is filled out.
Form 11
Form 11 provides details on the number of partners, the total number of partners, the total contribution each partner has received, the body corporate acting as a partner, and a summary of the partners. Within 60 days of the financial year’s conclusion, all limited liability partnerships (LLPs) are required to submit this form along with the prescribed fee. Therefore, the deadline for submitting LLP Form 11 is May 30th of each year.
You cannot wind up or close an LLP until you have submitted all annual returns. Therefore, penalties must be avoided by submitting the LLP Annual Return by the deadline.
Income Tax Return Filing
No matter how much revenue or profits there are, all LLPs registered in India are required to file an income tax return annually. Therefore, an LLP that is dormant and has not conducted any transactions is required to submit an income tax return.
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Maintenance of Documents
The Registrar at the LLP’s registered office is required to maintain the incorporation document, names of partners and any modifications made, proof of fee payment, statement of account and solvency, and annual return of the LLP. Authorities who are concerned should promptly provide those records for inspection.
Summary
A LLP is a business entity that combines the features of a partnership and a company. It is subject to regulation by the Ministry of Corporate Affairs’ Registrar of Companies. An LLP, a unique legal entity with perpetual succession, can engage in activities such as purchasing, selling, and retaining assets, employing individuals, suing or facing lawsuits, and entering contracts. LLPs are required to submit annual returns on Forms 8 and 11, and they must maintain accurate records of accounts using the double-entry system. Noncompliance may result in penalties. Furthermore, LLPs must submit an annual income tax return, regardless of revenue or profit, and retain critical documents at the registered office for inspection.
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FAQ’s
A Limited Liability Partnership (LLP) is a type of business that functions as both a company and a partnership. It limits the partners’ liability while still allowing them to run the business themselves.
An LLP can employ people, sue or be sued, open a bank account, buy, sell, and keep assets, and make all kinds of legal agreements. It functions as a separate legal entity from its partners and will continue to exist after them.
LLPs must use the double-entry accounting system to keep accurate books of accounts, send in yearly returns on Forms 8 and 11, and file an income tax return every year. They must also keep important papers at the registered office so that the authorities can examine them.
Part A of Form 8 is the Statement of Solvency, while Part B is the Statement of Accounts, Income, as well as Expenditures. Two partners must digitally sign it, and a professional accountant, company secretary, or cost accountant must certify it.
You must send in Form 11 within 60 days of the end of the fiscal year, which is usually May 30th every year. It lists the number of partners, the amount of money that was contributed, and other important facts about the structure of the LLP.
Penalties for non-compliance include fines ranging from Rs. 25,000 to Rs. 5,00,000 for the LLP, and fines for designated partners ranging from Rs. 10,000 to Rs. 1,00,000. Additional penalties include Rs. 100 per day for delayed filing of Form 8.
Yes, all LLPs, including those that are dormant or have not conducted any transactions, are required to file an annual income tax return, regardless of their revenue or profit.
The registered office of an LLP must maintain the incorporation document, names of partners and any modifications, proof of fee payment, statements of account and solvency, and annual returns. The concerned authorities must have access to these records for inspection.