LLP and Partnership Firm are both the types of business formations through which Partnership business can be done.
LLP is a newly established concept introduced in India by Limited Liability Partnership Act, 2008.
Under the partnership, each partner owns a share of the business. This is a business structure which is less expensive and it is even more customizable than a corporation while Limited Liability Partnership has the advantages of both Partnership and LLP as it has the limited liability of the Partners.
Difference between Partnership and LLP
|PARTICULARS||LIMITED LIABILITY PARTNERSHIP||PARTNERSHIP|
|GOVERNED BY:||It is registered under LLP Act, 2008||It is registered under Partnership Act, 1932|
|TIME OF REGISTRATION||5-7 days||7-10 days in complete process|
|LIABILITY||.Unlimited. Partners are severally and jointly liable for actions of other partners and the firm and liability extend to their personal assets.||Limited, to the extent their contribution towards LLP, except in case of intentional fraud or wrongful act of omission or commission by the partner.|
|TAX LIABILITY||30%+ Health and education cess||30%+ health and education cess|
|PRINCIPAL/AGENT RELATIONSHIP||Partners are agents of the firm and other partners.||Partners act as agents of LLP and not of the other partners.|
|DIRECTOR IDENTIFICATION NO./ DESIGNATED PARTNER IDENTIFICATION NO.||The partners are not required to obtain any identification number||Each Designated Partners is required to have a DPIN before being appointed as Designated Partner of LLP.|
|DIGITAL SIGNATURE||There is no requirement of obtaining Digital Signature||As eforms are filled electronically, atleast one Designated Partner should have Digital Signatures.|
|ANNUAL FILING||No return is required to be filed with Registrar of Firms||Annual Statement of accounts and Solvency & Annual Return is required to be filed with Registrar of Companies every year.|
|AUDIT OF ACCOUNTS||Partnership firms are only required to have tax audit of their accounts as per the provisions of the Income Tax Act||All LLP except for those having turnover less than Rs.40 Lacs or Rs.25 Lacs contribution in any financial year are required to get their accounts audited annually as per the provisions of LLP Act 2008.|
|CREDIT WORTHINESS OF ORGANIZATION||Creditworthiness of firm depends upon goodwill and creditworthiness of its partners||Will enjoy Comparatively higher creditworthiness from Partnership due to Stringent regulatory framework but lesser than a company.|
|NUMBER OF MEMBERS||Minimum 2 and Maximum 20||Minimum 2 partners and there is no limitation of maximum number of partners.|
|REGISTRATION||Registration is optional||Registration with Registrar of LLP required.|
Advantages of Income Tax Filing for LLP
ITR-5: Income tax return 5 is for
Procedure for Income Tax Filing for LLP
1. Complete the Questionnaire
We will provide a questionnaire which is required to be filled by you in which we will sought the basic details and documents pertaining to the Filing of ITR of the partnership firm
2. Review of the documents
All the documents provided to us and the questionnaire will help us to process further for preparation of books of accounts of the partnership firm
3. Filing of Income Tax Return
We will file further send you the provisional statements for your verification and will file your income tax return before the due date and protect you from any penalty after its duly signed by you.
The next step is to check the name availability. The name should be unique in nature and should not be similar to name of any other entity registered. It may take at least 1-2 days.
Mandatory Compliances for an LLP
Registered LLPs with the Ministry of Corporate Affairs (MCA) needs to file the following mandatory compliance requirements :
- Filing of Annual Return – LLP Form-11
- Filing Statement of Account & Solvency – LLP Form-8
(Statement of Statement of the Accounts/Financial Statements)
- Filing of Income Tax Returns
Filing LLP Annual Return
Annual Return or Form 11 is a summary of an LLP’s Partners and indication of change in the management.
Every LLP is required to file Annual Return in Form 11 to the Registrar within 60 days of closer of financial year i.e. has to be filed on or before 30th May every year.
Filing of Statement of Account & Solvency
(Filing of Annual Accounts/ Statement of Accounts/ Financial Statements/ P&L & Balance Sheet)
- LLP must maintain proper books of account. The accounts may be on cash basis or accrual basis.
- Statement of Solvency (Accounts) needs to be prepared every year ending on 31st March.
- LLP Form – 8 should be filed with the Registrar of Companies on or before 30th October every year.
- It should be noted that LLPs / FLLPs whose annual turnover exceeds Rs. 40 lakh or partner’s obligation of contribution exceeds Rs. 25 lakh are required to get their accounts audited by auditor of the LLP/ FLLP mandatorily.
Filing of Income Tax Return
LLP can file its return of income in ITR 5. it is mandatory for LLP to file return of income electronically under digital signature if its accounts are required to be audited under section 44AB.
|Sl. No.||Income Tax Return Particulars||Due Date|
In case Audit is not required
(Those LLPs whose annual turnover does not exceeds Rs. 40 lakh or partner’s obligation of contribution exceeds Rs. 25 lakh are required to file their Income Tax. They are not required to get their accounts audited by their Auditor)
31st July of every year
In Case Audit is required
(Those LLPs whose annual turnover exceeds Rs. 40 lakh or partner’s obligation of contribution exceeds Rs. 25 lakh are required to file their Income Tax. They are required to get their books audited under the Income Tax Act.)
30th September of every year
LLPs Involved in International Transaction
(LLPs that entered into an international transaction with associated enterprises or undertook certain Specified Domestic Transactions are required to file Form 3CEB. Form 3CEB must be certified by a Chartered Accountant.)
30th November of every year
Tax Rate Applicable
Partnership Firms Income chargeable to tax at the rate of 30%
12% of Tax when income exceeds Rs 1crore
FAQ's on ITR Filing for LLP
Yes, an existing partnership firm can be converted into LLP by complying with the Provisions of clause 58 and Schedule II of the LLP Act.
ROC – Filings: Form 17 needs to be filed along with Form 2 for such conversion and incorporation of LLP.
No, only private / unlisted public company can be converted into LLP.
it is not mandatory to file the charge details with the office of Registrar but the stakeholders can voluntarily file the same.
ROC – Filing: The charge details i.e. creation, modification or satisfaction of charge, can be filed through Appendix to e-Form 8 (Interim).
Yes, any existing private company or existing unlisted public company can be converted into LLP by complying with the Provisions of clause 58 and Schedule III and IV of the LLP Act.
ROC- Filings: Form 18 needs to be filed with the registrar along with Form 2 for such conversion.
Every LLP has to maintain uniform financial year (April to March) ending on 31st March of a year