What and when is LLP Compliance Mandatory ?

What and when is LLP Compliance Mandatory ?

Roc filing for Limited Liability Partnership

Limited Liability Partnerships have to get the books of account audited by practising Chartered Accountants, mandatory whose turnover is more than INR 40 lakh or whose contribution has exceeded INR 25 lakh. Every LLP is required to have at least two Designated Partners who shall be individuals and at least one of them shall be a resident of India. The mutual rights and duties of partners shall be governed by the agreement between LLP and the partners. This Agreement would be known as “LLP Agreement”. The deadline to file the LLP Annual return filing is 30th September. But for the LLPs whose tax audit has not required any deadline. So, the due date for tax filing is 31st July.

Roc filing forms for Limited Liability Partnership

Usually, an LLP is required to file two forms with ROC

1. The LLP Annual return is to be filed in the prescribed Form-11. It is the summary of management affairs of LLP, such as numbers of partners along with their names. Apart from this, the Form-11 has to be filed by 30th May each year. Every LLP who is already registered with the Ministry of Corporate Affairs have to file the Annual Returns and Statement of Accounts for the Financial Year 2018.

The procedure for filing form-11:

It must be filed on the MCA portal. The form has to be downloaded and filled in an offline mode with certain prerequisites:

1. LLPIN (Limited Liability Partnership Identification Number) allotted to the LLP is needed to pre-filled with the basic data.
2. Declaration about contribution received by all the partners of the LLP and details of corporate bodies as partners.
3. Payment of fees with respect to Form-4 (Notice of appointment, cessation, and change in designation of a designated partner or partner) and processing of form-4 should be completed (If applicable).
4. Particulars of penalties imposed on the LLP as well as Partners and compounding offences (if any).

Attachments:

The following documents must be attached with Form 11:

1. Details of LLP and/ or company in which partners/ designated partners (DP) /directors/ partner. (It is mandatory to attach this detail in case any partner/ DP is a partner in any LLP and/ or director in any other company).
2. Any other information can be provided as an optional attachment to this Form.

Signature of Partners & Chartered Accountant:

1. Form-11 must be digitally signed by Designated Partner along with their DPIN (Designated Partners Identification Number). Further, if the Total contribution made by Partners is more than Rs. 50 lakhs or Turnover of LLP is more than Rs. 5 crores then the form needs certification of a practising Company Secretary. If figures are less than the above limits then the designated partner themselves can certify the form.

2. Form-8 is a statement of accounts, every LLP is required to file Form-8 with Registrar of Companies every year. It is the declaration given by all Designated Partners of LLP that whether they are able to pay their debts in full as they become due in the normal course of business or not. LLP firm is required to prepare Statement of Account and Solvency in Form-8 with the Registrar, within a period of thirty days from the end of six months of the financial year to which the Statement of Account and Solvency relates. Hence, Form-8 is also known as Statement of Account & Solvency.

The procedure for filing form-8:

The form has to be downloaded and filled with the following details:

Statement of Account & Solvency:

In Form-8, the LLP must provide details of financial transactions undertaken during the financial year and position at the end of the financial year. The LLP must also declare:

• Declare that the turnover is above or below Rs. 40 lakhs.
• Declare that the LLP has already filed a statement indicating the creation of charges or modification or satisfaction till the present financial year.
• Declare that the partners or authorized representatives have taken proper care and responsibility for the maintenance of adequate accounting records and preparation of accounts.

Attachments:

The following documents must be attached with Form-8:

• Mandatory: Disclosure under Micro, Small and Medium Enterprises Development Act, 2006.
• In case of contingent liabilities exist, Statement of contingent liabilities to be attached.
• Any other information can be provided as an optional attachment.

Signature of Partners & Chartered Accountant

Form-8 must be digitally signed by a minimum of two Designated Partners of LLP or Authorised Representatives of Foreign LLP. Further, if the total turnover of the LLP exceeds Rs. 40 lakhs or partner’s obligation of contribution exceeds Rs. 25 lakh, then Form-8 should be certified by the auditor of the LLP/ FLLP. Else, the digital signature of a minimum of two Designated Partners would suffice.

Following are the three main compliances which are a mandatory thing for the LLP:

a) Annual Return
b) Financial Statements of the LLP
c) Income Tax Returns Filing.

Penalty for non-filing of Form-11 & Form-8 on time

Special care must be taken regarding the Annual Return filing on time as non- compliance attracts a penalty of Rs. 100 per day of default with no ceiling.

Advantages of a Limited Liability Partnership

Some reasons why LLPs are popular formation choices:

The Partners Have Limited Legal Liability

The biggest benefits of forming an LLP are limited legal liability and flexible management roles. Unlike general partnerships, an LLP does not expose its partners to unlimited legal liability. In other words, if someone sues the LLP, the partners will not be indefinitely liable for that amount. Their liability will be limited to the amount that they contributed to the LLP for its formation. However, this limited legal liability shield will be broken if the lawsuit stems from an intentional act of the partner.

Flexible Roles for Partners

An LLP has extremely flexible management roles for the partners. The roles are defined in the LLP agreement that the partners draft themselves. Under the structure, each partner has the right to manage the LLP and have the right to choose how much management that they want. Thus, partners can have a very active role or even act as a silent in the LLP.

Ease of Formation

State laws provide a clear structured process for forming LLPs. Thus, they are relatively easy to form. Generally, it requires the partners to fill out a registration form and file it with the local secretary of state. Nonetheless, the registration may require the partners to put in writing their roles, responsibilities, financial contributions, and debts distributions.

Pass-Through Tax

Another big benefit of LLPs is that it has pass-through tax such that it avoids double taxation. LLP partners will only pay their own personal income taxes, while the LLP will not be taxed as a business entity.

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