In LLPs there are lesser compliances as compared to private limited companies and public limited companies. Therefore, professionals prefer LLP structure to start business. LLP, undoubtedly, a model which offers twin benefits of limited liability and flexible internal structure with lesser compliances
Let's look at what compliance are required to be done in LLPs:
Periodic Compliance Requirement
- Maintain Books of accounts:
An LLP must maintain its books of account either on cash basis or accrual basis according to accounting principles for recording correct position of transactions. Some of the transactions are as follows:
- Money received or expended by LLP;
- Assets and liabilities;
- Recording of inventories purchased from time to time.
- Any other item as decided by the partners including maintaining of minutes of meeting and recording of all resolutions.
Annual Compliance Requirement
- Statement of Accounts and Solvency statement within 7 months in Form 8
LLP is required to file a statement of Accounts and solvency within one month from the end of 6 months of the financial year.
- Audit Requirement:
Requirement of audit in LLP arises only when:
- LLP's turnover exceeds Rs. 40 Lakh; and
- Capital contributions of the partners exceed Rs. 25 Lakh.
Now, we can observe that there are not plethoras of compliance as stipulated under the LLP Act, 2008. Because of this, there has been proliferation of LLPs in India