Annual Compliance for LLP
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LLP Compliance in India
In India, LLP or Limited Liability Partnership enjoys a separate status and an organization needs to maintain its active status by regularly filing with MCA (Ministry of Corporate Affairs). Annual Compliance filing is compulsory for any LLP, whether having a business or not. LLP Compliance in India requires filing 2 separate forms. One form is for Annual Return and another one is for Statement of Accounts & Solvency. The forms are filed for reporting the activities & financial data for each Financial Year in the future. The failure to fulfill all the requirements for LLP Compliance levies an additional fee of Rs. 100 each day of a delay till the actual filing date. Hence, apart from the mandate, the heavy penalty compels the Partners to fulfill the requirements.
For LLP, the returns should be filed periodically to maintain compliance & avoid heavy penalties for non-compliance. An LLP has only a few compliances to be followed every year which is amazingly low as compared to the compliance requirements placed on the Private Limited Companies. Whilst non-compliance might only charge a Private Limited Company Rs. 1 lakh in terms of penalties and it might charge an LLP up to Rs. 5 lakhs.
LLP Compliance Certificate [Sample]
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 Compliance in India
Following are some benefits of LLP Compliance in India:
1 : Easy Closer and Conversion of LLP: For the LLP Conversion into any other organization or company, annual filing is very important. Regular compliance records ease the conversion task. The same applies in the case of LLP Closure. Even if the Limited Liability Partnership was non-operational, the Registrar may ask to fulfill LLP Compliance, with an additional LLP filing fee (if applicable).
2 : Avoid Penalties: With an intention to avoid huge penalties & fees, regular filing of forms protects Partners from being declared as defaulters. It also avoids further disqualification of contracts. Hence, Limited Liability Partnership needs to fulfill the Annual Compliance requirements. The non-fulfillment of LLP Compliance adds up in the form of heavy penalties till the actual date of filing.
3 : High Credibility: Legal Compliance is the main requirement for any business in India. The status of the LLP Annual filing is shown in the Master Data of the Limited Liability Partnership on the MCA portal & any individual can access the same. For loan approvals or any other requirements, compliance is a primary criterion to measure the Company’s Credibility.
4 : Financial Worth Record: The Forms filed by the Limited Liability Partnership are accessible by Companies. Hence, while entering into major projects or contracts, the concerned party may also inspect the financial worth. The annual filing provides its financial worth record & capacity to an interested individual or party.
5 : Greater Reputation: A vital requirement for any company is legal compliance. Anyone can access the Master Data of the LLP on the MCA portal to check the current status of the LLP Annual Filing. Compliance is a key factor in determining how trustworthy an organization or a Company is when approving loans or other needs of a similar nature.
Mandatory Compliance for LLP in India
Once an LLP is incorporated, there is some mandatory compliance that an LLP is required to fulfill. If a Limited Liability Partnership fails to comply with these requirements, it may have to pay heavy penalties. Following is the list of vital compliance that an LLP needs to follow after the LLP Registration in India:
One-Time Mandatory Compliance for LLP:
LLP Form-3:
The LLP Partners are required to draft an LLP Agreement & a copy has to be filed with the Registrar of Companies (ROC) in LLP Form-3 within 30 days of LLP Incorporation.
Opening a Bank Account:
- It’s vital to open a current bank account in the name of the Limited Liability Partnership with any Bank in India. All the transactions in the LLP Name should be transacted via the LLP Bank Account only.
PAN & TAN Number:
- Every Limited Liability Partnership in India must obtain PAN and TAN from the Income Tax Department. With the LLP (Second Amendment) Rules, 2022, the same shall now be allotted with the Certificate of Incorporation itself.
GST Registration:
- Every Business or company with an annual turnover of more than Rs. 40 lakhs (service providers Rs. 20 lakhs) is required to get GST Registration under the GST Act & Rules. It is not compulsory to obtain GST quickly after LLP Incorporation. The Limited Liability Partnership can obtain the Registration when required.
Annual Compliance for LLP:
Statement of Accounts & Solvency in LLP Form-8:
- Every Limited Liability Partnership is required to prepare & close its accounts until 31st Mar every year. Form-8 is to be filed by at least 2 Partners with the Registrar 30 days after the completion of 6 months of F.Y (Financial Year). The Statement of Account & Solvency can now be signed on behalf of the Limited Liability Partnership by its interim resolution expert.
Annual Return in Form-11:
- Form-11 is a summary of all the Partners like whether there are any changes in the LLP Management or not. It is required to be in Form-11 to the Registrar within 60 days from the Closure of the Financial Year.
Income Tax (IT) Return:
- Every Limited Liability Partnership has to file IT Return every year and the last date of filing of ITR Return is 31st July every year. However, any LLP under tax audit is required to file its IT Return by 30th Sep.
DIR-3 KYC:
- Each designated Partner for a Limited Liability Partnership is required to file Form DIR-3 KYC on or before 30th Sep of each Financial Year.
Audit:
- Only those Limited Liability Partnerships whose yearly turnover is more than Rs. 40 lakhs or whose contribution is more than Rs. 25 lakhs are required to get their accounts audited.
What are the Consequences of Non-Compliance for LLPs?
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
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FAQs
What is annual compliance for an LLP?
Annual compliance for an LLP involves filing various forms and documents with regulatory authorities to meet legal requirements.
When is the due date for filing annual compliance forms?
The due date for filing annual compliance forms typically depends on the LLP’s financial year-end. It’s usually within 30 days from the end of the financial year.
What forms need to be filed for annual compliance?
Commonly, Form 8 (Statement of Account & Solvency) and Form 11 (Annual Return) need to be filed for annual compliance.
Can the due date for annual compliance filing be extended?
In some cases, you can apply for an extension of the due date, but this may attract additional fees and penalties.
What is Form 8?
Form 8 is the Statement of Account & Solvency that provides details about the financial position and solvency of the LLP.
What is Form 11?
Form 11 is the Annual Return that contains information about the LLP’s partners, address, and capital structure.
Are there any penalties for the late filing of annual compliance forms?
Yes, late filing can result in penalties. The amount of the penalty increases the longer the forms are delayed.
Can LLPs apply for an exemption from filing annual compliance forms?
LLPs with a turnover below a certain threshold may be eligible for exemption from filing these forms.
What is the consequence of not filing annual compliance forms?
Non-filing of annual compliance forms can lead to fines, penalties, and even the potential for the LLP to be struck off the register.
Can changes to LLP details be made while filing annual compliance forms?
Yes, you can update changes to partner details, registered office address, and other relevant information while filing these forms.
Can annual compliance forms be revised after submission?
No, once submitted, the forms cannot be revised. Accurate information must be provided during the initial submission.
Are there any documents that need to be attached along with the annual compliance forms?
Generally, documents such as financial statements, bank statements, and partner details are required as attachments.
Can a designated partner sign the annual compliance forms digitally?
Yes, the forms can be digitally signed by the designated partner or authorized signatory.
What is the LLP Identification Number (LLPIN) and where can it be found?
The LLPIN is a unique identification number assigned to an LLP. It can be found on the LLP registration certificate.
Is an LLP required to hold an Annual General Meeting (AGM)?
LLPs are not required to hold an AGM. However, they must file annual compliance forms.
Are there any changes in annual compliance requirements due to recent regulatory updates?
It’s important to stay updated with the latest regulations as compliance requirements can change over time. Always consult a professional for accurate information.