Compliances Applicable on Limited Liability Partnership (LLP)

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Mandatory Compliances for Limited Liability Partnership (LLP)A Limited Liability Partnership is a globally recognized business entity. It was introduced in India by the procedure under the Limited Liability Partnership Act, 2008. Additionally, it includes the benefits of both companies as well as partnerships under one LLP name. The LLP rules are set by the Registrar of Companies i.e. Ministry of Corporate Affairs. This type of legal entity has a perpetual succession separate from its partners. You can contact us for your LLP registration as we value your dreams.

So let us have a look at the Compliances for LLP. But before we shall be looking into the compliances for the LLP, let us briefly understands the concept of Limited Liability Partnerships.

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Meaning of Limited Liability PartnershipPartnership

A Limited Liability Partnership means a business where a minimum of two partners is required and the maximum number of partners is not limited. The liability of the partners is limited to the amount of each partner’s capital contribution to the LLP.
An LLP is an alternative corporate form of business that provides the benefits of a Limited Liability Partnership and the flexibility of a partnership. An LLP can continue to exist regardless of changes in partners. It can enter into contracts and own property in its name. An LLP is a separate legal entity that is fully liable for its assets, but the partners’ liability is limited to their agreed contribution to the LLP.

Benefits of a Limited Liability Partnership

The following are the benefits of a Limited Liability Partnership:

  • Limitation of Liability: Similarly, the liability of LLP Partners is limited to the amount of cash supplied by them, reducing business risk and so protecting Partners’ assets.
  • Legal Entity Separate: The Separate Legal Entity advantage is also provided by the Limited Liability Partnership Act, 2008, which states that the LLP is different from its Partners.
  • Fewer Formalities for Compliance: The Limited Liability Partnership has a lower compliance load than other business structures, making it more cost-effective.
  • Reduced Registration Fees: The cost of registering a Limited Liability Partnership is substantially lower than that of registering any other business formation.
  • The audit is not a mandatory obligation: A statutory audit of a Limited Liability Partnership is not required. It is only necessary for the instances listed.
  • The agreement that is adaptable: The LLP Agreement can be changed to meet the needs of the partners, such as the addition or removal of partners or financial transactions.

Minimum requirements for the Incorporation of Limited Liability Partnership

The following are the minimum requirements for the incorporation of a Limited Liability Partnership:

  • Two Designated Partners are required.
  • The Designated Partners’ DIN
  • One Designated Partner’s Digital Signature Certificate
  • Contribution, whether material or intangible or other LLP benefits
  • There is no minimum capital required.
  • At least one Designated Partner must be an Indian citizen.

Documents Necessary for Incorporation of Limited Liability Partnership

Following are the documents required for the incorporation of the Limited Liability Partnership:

  • All of the partners’ passport photos
  • All partners’ PAN Cards
  • Proof of Identity of the Partner (Driving License/Voter ID Card/Passport)
  • Proof of Address (utility bill/bank statement/telephone bill from the last two months)
  • Proof of Business Address  Property owned: (Copy of Registry and Latest Govt. Electricity Bill or Water Bill)
  • Proof of Business Address Rented/leased: (Rent Agreement, NOC from the Owner, Latest Govt. Electricity Bill or Water Bill)

Limited Liability Partnership Incorporation Procedure (LLP)

Following is the procedure for the incorporation of a Limited Liability Partnership:

  • Fill out the Application Form: You must first complete the easy questionnaire supplied by our experienced staff.
  • Processing of Documents: In the second phase, we will need your papers in accordance with the questionnaire you filled out so that we may arrange them as needed and process them.
  • Availability of Names: The next step is to see if the name is still available. Now you must provide us with three names that are distinct and not identical to the names of any other entities registered. It might take up to 1-2 days.
  • E-filing for Company Incorporation: Once the name has been authorized, an online application must be made via E-Form Fillip, together with the necessary documentation received from ROC. This procedure takes another 2-3 days.
  • Obtain your Certificate of Incorporation: Finally, upon approval, an LLP Certificate of Incorporation will be sent via email, indicating that the LLP has been formed.
  • LLP Agreement Filing: Within 30 days after formation, our team will provide the LLP Agreement, which will be printed on stamp paper and lodged with the Registrar of Companies after receiving permission from the partners.

Compliance by LLP

Limited Liability Partnerships are separate legal entities; it is, therefore, the duty of the elected partners to maintain proper books of account and submit an annual report to the Ministry of Corporate Affairs (MCA) every year.
Limited Liability Partnership is not required to audit their books except where their annual turnover is more than 40 million rupees or where the contribution is more than 25 million rupees. Hence, an LLP does not need to have its books audited if it meets the above condition, simplifying the annual filing process.
Limited Liability Partnership is required to submit their account and solvency statement within thirty (30) days of the end of six (6) months of the financial year and their annual return within sixty (60) days of the end of the financial year. 

Unlike companies, Limited Liability Partnerships are compulsorily required to maintain a financial year from 1 April to 31 March. Hence, the Statement of Account and Solvency is required to be filed on or before 30 October of each financial year and the annual return for the LLP is due on 30 May of each year even if the LLP does not complete any business in that particular financial year. Certain annual filings are required regardless of whether the LLP has commenced operations or not.

Filing of LLP Annual Return (Format 11)

An LLP is required to file an annual report on Form 11. Form 11 is a summary of the LLP’s partners and information about a change in management. The deadline for filing Form 11 is within 60 days of the close of the financial year. This means that the annual report must be submitted by May 30 each year at the latest. 

Filing of Statement of Account and Insolvency (Format 8) 

All LLPs are required to maintain their books of account under the double entry system. Form 8 consists of bank statements and the ability to pay. Form 8 has two parts. They are: 

  • Part A – solvency statement 
  • Part B – statement of accounts and statement of income and expenditure. 

The deadline for filing Form 8 is within 30 days from the end of six months of the financial year, i.e. on or before 30 October. Audit of annual accounts is mandatory in case- 

  • Capital exceeds Rs. 25 lakhs; or 
  • Turnover exceeds Rs. 40 lakhs. 

Filing of Income Tax Return

LLPs are required to file their income tax return using Form ITR 5 – it can be downloaded or filed online using the digital signature of designated partners.

Consequences of non-compliance

If there is a delay in filing LLP Forms 8 and 11, you will have to pay a penalty of Rs. 100 per day of delay. No one can wind up or wind up their LLP without filing annual accounts. Failure to meet any of the mandatory requirements can also lead to high penalties.

Points to Ponder

The following are the points that you should keep in mind regarding LLP:

  • If the potential Designated Partner already has a DIN, you may also see if DIR-3 KYC has been completed. You can confirm this with the assistance of our professionals. If this has not yet been done, it can be done with the assistance of Legal Window.
  • After formation, the LLP is expected to manage all compliances like income tax filing, annual returns with ROC, and other legal requirements. 
  • In the following situations, LLP is needed to perform an audit:
    • When the Limited Liability Partnership’s contribution surpasses Rs.25 lakhs
    • When the Limited Liability Partnership’s yearly revenue surpasses Rs.40 lakhs.

Get ROC Annual filingsFinal words

Running a business, whether as a One Person Company, LLP, or a Private Limited Company, is not an easy task. It is an investment of time, money, and effort and also requires know-how of many formalities, regulatory, and financial. Completing all forms and returns on time is very important. Heavy penalties will be imposed if the forms are not submitted to the registrar on time.

Legal Window has a staff of professionals that monitor the due dates of your compliances and send you reminders through email. Connect to us if you want to deal with Corporate Compliances.

CS Urvashi Jain is an associate member of the Institute of Company Secretaries of India. Her expertise, inter-alia, is in regulatory approvals, licenses, registrations for any organization set up in India. She posse’s good exposure to compliance management system, legal due diligence, drafting and vetting of various legal agreements. She has good command in drafting manuals, blogs, guides, interpretations and providing opinions on the different core areas of companies act, intellectual properties and taxation.

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