LLP Annual Compliance

Limited Liability Partnership

Limited liability partnership (LLP) comprises of a partnership formed and registered bel under Limited Liability Partnership Act 2008, which is an alternative company business form that provides the benefits of limited liability of a company as well as the flexibility of a partnership. The LLP could hold its existence irrespective of changes in partners. It is able to step into contracts and holding property in its name. The LLP is a separate lawful entity, is legally responsible towards the full extent of its assets however legal responsibility of the partners is limited to their agreed contribution inside the LLP. Furthermore, no partner is liable owing to the independent or un-authorized actions of any other partners, therefore individual partners are protected from joint liability created by another partner’s wrongful business decisions or wrongdoing.

A Partner in a Limited Liability Partnership (LLP) has some duties and rights. Such, duties and rights of a Partner are.

Requirements for LLP Annual Compliance

It is compulsory that LLP’s follow their fiscal year from 1st April to 31st March. The LLP annual compliance is required to be met by every registered LLP even if there is no business activity.  Also, it is required to be met even if the LLP was closed down and whether or not there is an existence of the business bank account. LLP annual compliance is required to be met on a compulsory basis, regardless of these conditions.

Mandatory Compliances for a Limited Liability Partnership

Each and every LLP registered with the Ministry of Corporate Affairs are required to file Annual Returns and Statement of Accounts for each Financial Year. It is compulsory for an LLP to file a return regardless of whether it has done any business. There are 3 mandatory compliance requirements that an LLP must follow;

•    Filing of Annual Return

•    Filing of Statement of the Accounts or Financial Statements

•    Filing of Income Tax Returns

LLP Annual Compliance

A. Filing of the Statement of Account and Solvency:

•    One must fill up in the specified format as per LLP Form 8.

•    It is mandatory for every LLP to maintain the Book of Accounts consistent with Double Entry method.  Form 8 comprises a declaration on the solvency state of the LLP through its designated partners and gives details of the statement of assets as well as liabilities and statement of income and expenses of the LLP.

•    The form 8 is required to be signed by the partners and needs to be certified through a practicing chartered accountant, company secretary or cost accountant.

•    This is mandatory to be filed within 30 days from the end of 6 months of the close of the fiscal year that is by 30th October of each financial year.

•    LLPs with a turnover of above Rs. 40 lakh or the ones with the contribution of above Rs. 25 lakh are required to get their books of accounts audited through an active chartered accountant.

B. Annual Return Filing

•    The return must be filed with the Registrar of Companies.

•    One must fill up using the specified format - LLP Form 11.

•    This is must be filed within 60 days from the close of the fiscal year, in other words by 30th May of each year.

C. Filing of Income Tax Return

•    LLPs must file their income tax return by means of Form ITR 5 – it could be downloaded or filed online via the digital signature of the designated partners.

•    According to the Income Tax Act, every LLP must close their financial year by the 31st of March and consequently file the returns with the IT Department.

•    LLPs who has an annual turnover of above Rs. 60 lakh are required to get their books audited and file their return latest by 30th September each year.

•    LLPs whose accounts are not to be audited are required to file their returns latest by 31st July each year.

•    LLPs that have got involved in international transactions or have started specific domestic transactions must file Form 3CEB. The form is required to be certified through a qualified chartered accountant and is to be submitted by 30th November of every year.

Penalty Provisions

For MCA Filings:

According to the Limited Liability Partnership Act, 2008 filing of Form 8 as well as Form 11 is a compulsory requirement for each and every registered LLP. Any non-compliance with the LLP annual compliance would result in a penalty. The penalty sum is Rs 100 per day for each form not filed. No upper ceiling is stated for such penalty sum.

For Income Tax Filings:

The fine for defaulting on the filing of Income Tax returns on time is two-fold – Rs. 5000 must be paid through defaulters who missed the filing due date but do so before 31st December of every year. Rs. 10000 is payable by LLPs that fails to stick towards the extended deadline.

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Author:

eStartIndia Team