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Many individuals choose to establish a limited liability partnership instead of a private limited company. This is because LLPs have lesser compliance requirements as compared to private limited companies. Moreover, LLPs offer dual benefits of limited liability and flexible internal structure. In this blog post, we will explore the annual compliances for LLP in India.
LLP annual compliance refers to compliance requirements that must be fulfilled by every LLP at the end of every business financial year. It includes the following:
Maintenance of a proper book of accounts and filing annual returns with the Ministry of Corporate Affairs (MCA) every year.
Filing income tax returns.
Filing the statement of accounts within 30 days from the end of six months of the financial year and annual return within sixty days from the financial year’s end.
Filing tax audit if annual turnover exceeds 40 lakhs or if the contribution exceeds 25 lakhs.
Limited Liability Partnerships are subject to particular compliance requirements since they are regarded as separate legal entities from their owners. The LLP's designated partners are in charge of making sure that compliance is maintained. The LLP annual compliance calendar below states various annual compliance forms for LLPs along with purpose and their due date:
|
Compliance Form |
Purpose |
Due date |
|
LLP Form 3 (LLP agreement) |
To provide information about the LLP agreement and any modifications to it |
Within 30 days of incorporation of the company |
|
Form 11 (Annual Return) |
To provide a summary of the management affairs of the company, including the partners’ names. |
Within 60 days of closing the financial year |
|
Form 8 (Statement of Account and Solvency) |
To state details related profits and other financial details |
On or before October 30th every year |
|
Income Tax Return (ITR-5) if tax audit is not applicable |
If the LLP’s annual turnover does not exceed 40 lakh or partner’s contribution does not exceed 25 lakh, they must file their income tax but need not involve an auditor to audit accounts |
31st July of every financial year |
|
Income Tax Return (ITR-5) if tax audit is applicable |
If the LLP has an annual turnover more than 40 lakh or a partner’s contribution over 25 lakh, they must file their income tax and also get their accounts audited by a tax auditor under the income tax Act. |
30th of September of every financial year |
|
DIR-3 KYC Form |
To ensure that the Registrar of Companies has updated records of LLP partners. |
On or before 30th September of every financial year |
The importance of compliance for LLPs can be understood through the following points:
Ensuring compliance is a legal requirement. By fulfilling the annual compliance requirements, the LLP can avoid fine, late fees and other penalties.
A company maintains a clear picture regarding its assets, liabilities, business performance and growth. This can help to promote profitability.
By maintaining annual accounts record and filing the statement of accounts and solvency with the registrar, LLP meet their legal obligations.
Compliance accelerates the process of transferring ownership if needed.
An LLP which fulfills legal requirements has a good reputation amongst clients and employed individuals.
Let’s check out the non-compliance penalties for LLPs in India:
If annual return using form 11 is not filed by the due date 31st May, then a penalty of Rs. 100 per day will be imposed until the LLP compliance requirement is fulfilled. There is no maximum limit on the penalty amount.
If e-form 3 is not filled within 30 days of incorporation, a penalty of Rs. 100 each day will be imposed on the LLP partners.
In case of failure to comply with the annual returns provisions, the LLP can be fined anywhere between Rs. 25,000 to Rs. 5,00,000.
In case of contravention of annual returns provisions, the LLP’s designated partners can be fined between Rs. 10,000 to Rs. 1,00,000.
To avoid the penalties associated with non-compliance with LLP annual requirements, make sure to fulfill all the annual compliances in a timely manner.
Every LLP in India must fulfill the annual compliance requirements for operating smoothly and legitimately. By ensuring annual compliance, LLPs enhance their brand reputation and maintain transparency. Moreover, it helps them to avoid getting fined. If you need assistance in fulfilling annual compliance requirements for your limited liability partnership, connect with Registrationwala.
Q1. Does LLP need to file an annual report?
A. Yes, LLPs in India need to file an annual report with MCA using form 11.
Q2. What is the cost of annual compliance for an LLP?
A. The annual compliance cost for an LLP depends on the LLP form being filed.
Post updated on: 16-10-2024
Hey there, I'm Dushyant Sharma. With the extensive knowledge I've gained in past 8 years, I have been creating content on various subjects such as banking, insurance, telecom, and all the important registration and licensing processes for various companies. I'm here to help everyone with my expertise in these areas through my articles.
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