Annual Compliances for LLP
Annual Compliance for LLP - An Overview
In India, a Limited Liability Partnership (LLP) is considered a separate legal entity and must keep its status active by regularly filing documents with the Ministry of Corporate Affairs (MCA). LLPs must file two specific forms each year: one for the Annual Return and another for the Statement of Accounts & Solvency. These forms report the LLP’s activities and financial status for the year.
If an LLP does not meet these filing requirements on time, it faces an extra fee of Rs. 100 per day of delay until the filing is completed. This penalty, along with the legal requirement, makes it important for partners to stay compliant.
LLPs have fewer compliance requirements each year compared to Private Limited Companies, which makes their process simpler. However, if an LLP fails to comply, it can face penalties up to Rs. 5 lakhs, while non-compliance for a Private Limited Company could result in a penalty of up to Rs. 1 lakh.
What are LLP (Second Amendment) Rules, 2022 ?
There are some vital changes have been made via LLP (Second Amendment) Rules, 2022, which are as follows:
1: There can be 5 Partners instead of 2 Designated Partners (without having DIN) during Incorporation.
2: Limited Liability Partnerships shall be allotted their TAN & PAN along with the CoI (Certificate of Incorporation) itself.
3: For filing Consent of Partners, a web-based Form-9 shall be made.
4: The Statement of Account & Solvency shall now be signed on behalf of the LLP by its interim resolution professional
5: All the LLP forms have now become web-based or online-based.
Benefits of LLP Compliances in India
Easier Conversion and Closure of LLP: To convert an LLP into another type of organization or company, or to close it, regular annual filing is essential. Keeping up with these filings makes the conversion or closure process smoother. Even if the LLP is not operating, the Registrar may still require compliance and additional fees if necessary.
Avoiding Penalties: To prevent large fines and fees, regular filing of forms is crucial. It helps partners avoid being labeled as defaulters and prevents problems with contract qualifications. Regular compliance with annual requirements helps avoid hefty penalties for late filings.
Enhanced Credibility: Legal compliance is crucial for businesses in India. The status of an LLP’s annual filings is visible on the MCA portal, which anyone can check. For loan approvals or other needs, showing compliance helps demonstrate the company’s reliability.
Financial Record Keeping: The forms filed by an LLP are available to other companies. This means that when entering into significant projects or contracts, others can review the LLP’s financial record and capacity through these filings.
Better Reputation: Legal compliance is essential for any company. The Master Data of the LLP, which shows the status of annual filings, is publicly accessible on the MCA portal. Compliance is a key factor in assessing how trustworthy a company is, especially for loan approvals or similar needs.
Mandatory Compliance for LLP in India
One-Time Mandatory Compliance for LLP:
LLP Form-3: LLP Agreement Filing: LLP partners must create an LLP Agreement and file it with the Registrar of Companies (ROC) using LLP Form-3 within 30 days of the LLP’s formation.
Opening a Bank Account: Bank Account: It’s important to open a current bank account in the LLP’s name at any bank in India. All transactions must be done through this LLP bank account.
PAN & TAN Number: Obtaining PAN and TAN: Every LLP in India must get a PAN and TAN from the Income Tax Department. As per the LLP (Second Amendment) Rules, 2022, these will now be provided along with the Certificate of Incorporation.
GST Registration: Getting GST Registration: Businesses with an annual turnover over Rs. 40 lakhs (or Rs. 20 lakhs for service providers) must register for GST under the GST Act & Rules. GST registration is not required immediately after LLP formation but should be obtained when needed.
Annual Compliance for LLP:
Statement of Accounts & Solvency (LLP Form-8): Annual Accounts: LLPs must prepare and close their accounts by March 31st each year. Form-8 needs to be filed by at least two partners with the Registrar within 30 days after six months of the Financial Year’s end. This statement can now be signed by an interim resolution expert on behalf of the LLP.
Annual Return (Form-11): LLP Management Summary: Form-11 summarizes any changes in LLP management. This form must be filed with the Registrar within 60 days after the Financial Year ends.
Income Tax (IT) Return: Filing IT Return: LLPs must file their IT Return every year by July 31st. If the LLP is under tax audit, the IT Return must be filed by September 30th.
DIR-3 KYC: Partner KYC Filing: Each designated partner in the LLP must submit Form DIR-3 KYC by September 30th each year.
Audit: Audit Requirement: LLPs with an annual turnover exceeding Rs. 40 lakhs or contributions over Rs. 25 lakhs must have their accounts audited.
What are the Consequences of Non - Compliance for LLP's
If there is any delay in filing Form-8 and Form-11 of LLP, you will have to pay the penalty of Rs. 100/day of default. One cannot wind up or close their LLP without filing Annual Accounts. Also, non-compliance with any of the mandatory requirements may lead to heavy penalties
FAQ's
Annual compliance for an LLP means submitting different forms and documents to meet legal requirements each year.
The due date for filing annual compliance forms depends on when the LLP’s financial year ends. Generally, the forms need to be filed within 30 days after the financial year ends.
Commonly, Form 8 (Statement of Account & Solvency) and Form 11 (Annual Return) need to be filed for annual compliance.
In some situations, you can request an extension for the due date, but this might come with extra fees and penalties.
Form 8 is the Statement of Account & Solvency that provides details about the financial position and solvency of the LLP.
Form 11 is the Annual Return that contains information about the LLP’s partners, address, and capital structure.
Yes, if you file the forms late, you will face penalties. The longer you delay, the higher the penalty amount becomes.
If you don’t file the annual compliance forms, you could face fines, penalties, and the possibility of the LLP being removed from the register.
Yes, you usually need to attach documents like financial statements, bank statements, and details of the partners.
Yes, the annual compliance forms can be digitally signed by the designated partner or an authorized signatory.
The LLPIN is a unique identification number assigned to an LLP. It can be found on the LLP registration certificate.
LLPs are not required to hold an AGM. However, they must file annual compliance forms.