Annual Compliance for LLP
Relevant provisions : Limited Liability Partnership Act, 2008 and Limited Liability Partnership Rules, 2009
Partnership has been the most desirable form of business since ages. Just by adding a prefix i.e ‘Limited Liability’, A new form of business is created which is LIMITED LIABILITY PARTNERSHIP. The ulterior motive for constituting this form of business is to cop up with the drawbacks of partnership and to commemorate with the stringent requirements of company.
So, Limited liability partnership is a form of entity which entails features of a partnership firm and a company. The LLP is managed by its partners and it is a separate legal entity from its partners.
The incorporation process of LLP is simple and it does not require much compliance formalities, hence, LLPs are preferred by Professionals, Micro and Small or closely-held businesses.
The concept of Limited Liability Partnership has been brought by way of enforcing Limited Liability Act, 2008.
Some of the major benefits enjoyed by LLPs are the following:
- LLP is separate legal entity form its partners.
- It can raise funds from Partners, Banks and NBFCs.
- The procedure for Incorporation, conversion and closure of LLP is simple and easy.
- It has assets and liabilities that are separate from that of the promoters.
- LLP can easily Transfer its ownership.
LLP’s are regulated by the Registrar of Companies, Ministry of Corporate Affairs. All LLPs are required to endure compliances and file certain statutory filing with the Government every year. It is mandatory for an LLP to file anAnnual return, which is not linked to Profits or Turnover. Three compulsory compliance with regard to LLP are:
1. Filing of Annual Return
2. Form -8
3. Form -11
4. Maintenance of Books of Account
5. Filing of Income Tax Returns
FILING OF ANNUAL RETURN
a. FORM-8
What consists Form-8?
Form-8 consists of the statement of Account and Solvency. It consists of information related to the statement of assets of the LLP and liabilities and statement of income and expenditure of the LLP.
What is the Due date of filing of this form?
Form 8 should be filed within 30 days from the end of 6 months of the end financial year. i.e. by 30th October of each financial year.
Who shall sign the form?
Designated partners must sign the form digitally. Further, it must be certified by a chartered accountant, auditor or the accountant of the LLP.
How many parts are there in this form?
There are two parts in Form 8. They are:
- Part A – Statement of Solvency
- Part B – Statement of Accounts, Statement of Income & Expenditure
b. FORM 11
What consists of Form 11?
Form -11 consist of annual return. It contains the details of all the partners, their contributions towards the LLP, etc.
What is the Due date of filing of this Form-11?
Form-11 should be filed within 60 days of the end of financial year. i.e. on or before 30thMay every year.
Who shall sign the form?
It must be Digitally signed by one of the Designated Partners of the LLP. In case total obligation of contribution of partners of the LLP exceeds Rs. 50 lakhs or turnover of LLP exceeds Rs. 5 crores, then LLP Form 11 needs to be certified by a Company Secretary in whole time practice.
What are the documents required to File LLP Form 11?
Basic details like Total obligation of contribution, total contribution received by partners of the LLP, Summary of Designated Partners and Partners etc.
Further, details of LLP and/ or company in which partner/ designated partner is a director/ partner is attached to the form.
GENERAL QUESTIONS FOR BOTH THE FORMS I.E. FORM 8 AND FORM -11
Do I need to file Form-8 and Form-11 even if no transaction has taken place during the year?
To maintain the active status of the LLP it is required to file the forms even if no transaction has taken place during the year so that MCA is updated with the state of affairs of LLP.
What is the filing fees for Form-8 and Form-11?
The filing fees is Rs. 50 for Form-8 and for Form-11.
1. What is the penalty for late filing of Form-8 and Form-11?
The penalty of Rs.100/day if you have not filed this form.
Is there any chance of waiver of penalty for non-filing of Form-8 and Form-11?
Yes, recently on March 04th 2020, LLP settlement Scheme, 2020 has been launched vide circular 6/2020 under which Form-8 and form-11can be filed without payment of late fees.
2. MAINTENANCE OF BOOKS OF ACCOUNTS AND DOCUMENTS
All LLPs are required to maintain its books of accounts on cash basis or accrual basis. Other relevant documents like incorporation document, names of partners and changes made, proof of fee payment, statement of account & solvency & annual return filed by LLP should also be kept at its registered office. The books of accounts shall also be preserved in the registered office of the LLP for the specified period.
3. FILING OF INCOME TAX RETURNS
Every LLP has to file income tax return for every year. Since LLP is a separate legal entity, so along with partners income tax return you have to file LLP’s income tax return as well within due date.
4. LLP AUDIT REQUIREMENT
- LLP whose turnover does not exceed, in any financial year, 40 lakh rupees or whose contribution does not exceed 25 lakh rupees is not required to get its accounts audited.
- Where the partners of LLP do not decide for audit of the accounts of LLP,such LLP shall include in the Statement of Account and Solvency, a statement by the partners to the effect that the partners acknowledge the responsibility for complying with the requirements of the Act and the Rules with respect to preparation of books of accounts and a certificate in the specified form specified in FORM 8.
- The audit of LLP shall be done by a Chartered Accountant in Practice only.
- An auditor or auditors of a limited liability partnership shall be appointed for each financial year of the LLP for auditing its accounts.
Conclusion
The requirements mentioned above are compulsory to be followed irrespective of any number of transactions or amount of turnover. Limited Liability Partnership which is flourishing in the business world has bear the burden of multiple compliances to avoid the liability arising from fines and penalties. But is it only for avoiding penalties? The answer is no. Since LLP has to comply way fewer compliances as compared to company it is always better to file all the forms and returns before the due date to escape hefty penalties with timely annual LLP compliance filing.
Author Bio
sir please provide the format of financial statements & audit report for LLP.