Introduction: Limited Liability Partnership
The Limited Liability Partnership (LLP) is an ameliorated version of the Partnership. The LLPs are incorporated and are governed by the Limited Liability Partnership Act 2008. The main objective behind introducing the LLP registration was to provide a business form that is simple to operate without risking the liabilities of the owners.
To register a business, LLPs are the most preferred type of entity as it provides the benefits of both a partnership firm and a company.
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Benefits of LLP
- Limited Liability – This means that the liabilities of all the designated members is limited meaning if the company experiences any loss, then the personal assets of the company’s partners won’t be seized i.e. the partners are not required to pay for the losses from their personal assets.
- Separate Legal Entity- the Company’s existence will never demolish or dissolve by any means for e.g. death of the partners, any exit of partners etc, thus making it a separate legal entity.
- Easy transfer of shares - Unlike the partnership firms, the addition of new partners was really difficult as it affects its existence, but in LLP is it easy to add new partners or to transfer the shares.
- No minimum capital requirement – Unlike other companies, the LLP has the privilege that they do not require any minimum capital to start the business or to register it.
- No limit of the maximum number of partners- a private company has a maximum cap on the number of members they can keep, but in the case of LLP there is no such limit. It requires a minimum of 2 partners to form an LLP and the maximum can be any number.
- The designated partners have only rights in the profits and the loss of the company. The company’s assets will never be owned by the partners of the company.
- Similar to other companies, an LLP can also issue debentures on fixed charges or floating charges.
- No audit – All the other types of business entities require a regular audit. But in the case of LLPs, the audit is not required until and unless.
- Up to Annual turnover of Rs. 40 lakhs
- Up to the capital contribution of Rs. 25 lakhs.
Similar to all the other entities, the LLP also show and submit the whole financial year data to the respective ROCs of their states. This submission includes – the audited statements, balance sheets, designated partner’s data if there is any change etc. These annual filings are termed as the Annual Compliances of LLP. As per LLP Act 2008, it is the prime duty of the designated partners for the timely filing of all LLP compliances.
As per the guidelines mentioned, every company registered under LLP Act, 20008 have to fulfil annual ROC compliances. All the companies are required to present their annual details, including the financial statements or loan details, shareholder and director details, etc. by filing the prescribed forms.
If a company fails to file and fulfil the compliances by any chance, then the company will result in a punishable offence with fines associated with that particular compliance. These penalties increase day by day from the due dates.
This can even lead to the stuck-off of the company and directors' disqualification. Any failure or delay in this will lead to heavy penalties. As per one of the MCA’s report due to non-filing of the compliances, almost 2 lakh companies got stuck off and almost 3 lakh directors got disqualified.
LLPs are exempted from the following.
- maintenance of Minutes book,
- Statutory Registers
- AGM is not needed
- Conducting board meetings are not necessary
- Not compulsory to pay Dividend Distribution Tax
Following are list of compliances that a LLP has to follow within a financial year -
- Annual Return -Annual Return is required to submit in Form 11 with a summary of Partners and indication of change in the management within 60 days of closer of financial year i.e. on or before 30th May every year.
- Filing of Statement of Account & Solvency - This includes the Filing of Annual Accounts, Statement of Accounts, Financial Statements, Profit & Loss & Balance Sheet
- All the LLPs are required to maintain proper books of accounts.
- Statement of Solvency (Accounts) needs to be prepared in the end of the financial year.
- LLP Form – 8 needs to be filled with ROC on or before 30th October
- In case the annual turnover exceeds Rs. 40 lakh or partner’s contribution exceeds Rs. 25 lakh, then there is a mandatory requirement to get their accounts audited.
Annual Return (Form 11)
within 60 days of closer of financial year
Statement of Account & Solvency (Form 8)
on or before 30th October every year
- Filing of Income Tax Return
Income Tax returns are to be filled in for ITR 5 under section 44B. The Income Tax rate for LLPs is 30%
- Surcharge: The amount of income tax shall be increased by a surcharge at the rate of 12% of such tax, where total income exceeds Rs. 1 crore rupees.
- Health and Education Cess: The amount of income tax and the applicable surcharge is calculated at the rate of 4% of such income tax and surcharge
Income Tax Return Particulars
Audit is not required
31st July of every year
Audit is required
30th September of every year
LLPs Involved in International Transaction
(these are required to file Form 3CEB. Form 3CEB must be certified by a Chartered Accountant.)
30th November of every year
Penalty for Non Filing of LLP compliances
In case of non-filing of Annual compliances
- As per section 34 of Limited Liability Partnership Act, 2008, a penalty of INR 100 per day will be applied if Form 8 for a statement of Account and Solvency within 30 days.
- As per section 35 of Limited Liability Partnership Act, 2008, a penalty of INR 100 per day will be applied if Form 11 for Annual Return within 60 days
- For Designated Partner – the penalty can range from Rs. 10,000 to Rs. 100,000
- ROC have a right to issue Notice to LLP and initiate legal proceedings - like strike off.
- The ROC can issue Notice to LLP and initiate legal proceedings against such LLP.
- As per Income Act, if an LLP fails to file an income tax return in ITR 5, the penalty is levied on the LLP.
In case of non-filling of LLP Agreement
The LLP agreement is required to be executed within 30 days from the incorporate date of the LLP. In failing so, the LLP will be levied with penalty i.e. Rs.100 per day.
Registering a LLP company is quite easy, by from the above discussion it’s very clear that one have to maintain and fulfil the requirements as by MCA under LLP Act 2008. It is necessary to file for Annual Returns of LLP even in case, if you are not doing any business. In this case you must file for NIL Returns. A LLP has much lessor compliances comparing to the other companies. If you are running a LLP, it’s very important to follow the guidelines set by authorities. These compliances are needed to be done on annual basis. It’s not only about the filling but it also about the correct filing of the form within due date.
Corpseed advice you that it’s better to avoid the last minute filing of the forms, as many times MCA portal also not works due to heavy traffic. Our experts will help you in the filing of all the forms days in advance.
This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of author, not corpseed, and have not been evaluated by corpseed for accuracy, completeness, or changes in the law.
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