Annual Compliances for Limited Liability Compliances

Publishing Date: 10 Sep, 2024

Introduction

For ensuring the legal and financial integrity of a Limited Liability Partnership (LLP), managing annual compliance is considered as one of the best ways for assurance. There are certain mandatory compliances and these are important for both new and established limited liability partnerships (LLP). It will ensure LLP stays compliant with laws and protects your LLP from fines. In order to maintain compliance with the Income tax Department and the Registrar of companies, it is important to go over the primary yearly compliances. In this page you'll read all the required compliances under LLPs in India.

Annual Compliances for Limited Liability Partnership

There are some annual compliances a LLP should fulfill for smooth functioning of the LLP. These are the mandatory annual compliance that should be performed every year. Primary responsibility of completing these compliance is of designated partners of LLP or such person authorized by them.They are as follow:

Form-11: Form-11 is an annual return that is to be filled by all LLPs irrespective of turnover during the year. Form-11 needs to be filled even if the business does not carry out any operations or business during the financial year. This form includes details of total contribution by/to partners of the LLP, Contribution received during the year in cash/kind, total contribution received till date, partner details, details of notice received towards penalties imposed or compounding offenses committed during the financial year.

Due date - Form-11 must be filed within 60 days from the end of the financial year i.e, before 30th May.

Penalty - The penalty for any delay in filing the form is ₹100 per day.

Form-8: Form-8 is a Statement of accounts and Solvency. It represents the financial transactions carried out during the whole financial year and shows assets and liabilities details, revenue of LLP, its profits & losses. The form-8 must be filed within 30 days before the end of the six months of the financial year to which it relates.

Due Date - In simple words the due date to file this form is 30th October every year.

Penalty - The penalty for the delay is ₹100 per day.

ITR Filing and Tax Audit: ITR Filing is another compliance required after incorporation of the LLP. Every LLP is required to file ITR irrespective of revenue or losses. For LLP ITR filing, form ITR 5 is filed. LLP whose revenue exceeds 40 lakh or contribution exceeds 25 lakh are required to have their accounts audited by a qualified CA.

Due Date - The due date to file LLP ITR without tax audit is 31st july every year and LLP liable for tax audit required to file tax audit report by 30th september and ITR by 31st October.

Penalty - If the return is filed within 30 days after the due date, the penalty will be ₹5000/- but if it is not filed within 90 days it will increase up to ₹10,000.

Tax Audit Requirement: With effect from 1st April 2021, the threshold limit for applicability of tax audit other than professional firms is increased to Rs 10 crore in case cash transactions do not exceed 5% of the total transactions. (i.e., Cash receipts/payments does not exceed 5% of the total receipts/total payments). For professional LLP firms tax audit limit is applicable if receipts exceed 75 lakhs in a year.
Designated Partners KYC: It is a process in which all partners need to verify their personal details provided in DIN KYC form with the Ministry of Corporate Affairs (MCA) to keep their DIN activated . Any partner who has DPIN or DIN must file the KYC form annually. For first time filing or if there is any update in personal details DIR 3 KYC form is filed. In case there is no update, a web based KYC form is filed where it is verified through mobile and email OTP. The KYC process must be completed annually.

Due date -The due dateis 30th September for completing DIR KYC compliance.

Penalty - The late fee for the delay of designated Partner KYC is ₹5000/-.

Book Of Accounts: It is important to maintain a book of accounts on cash or accrual basis. It helps to keep a detail of every rupee used within the company. This record can be maintained manually in a register at the registered office.

Due Date: Books of account have to be updated regularly during the financial year. In case anything is missed or any adjustment entry has to be done, it has to be updated by March 31st.

Penalty: The penalty for non-maintained book of account is ₹25000 & in case of incorrect or incomplete it can be up to ₹1,50,000.

List of Other Compliances & Registration for LLP

Following is the list of compliances under LLP need to be fulfilled and other optional registration. These compliances need to be completed depending on their due date.

S. No.	Other Requirements	In Detail
1.	PAN and TAN applications	Separate PAN and TAN applications are not required now. PAN and TAN letter comes along with incorporation of LLP on registered LLP email.
2.	LLP Agreement- Form 3	It is a written contract which legally binds all the partners of the business.
3.	LLP Seal	The common seal is used to sign documents.
4.	Letterhead	It helps to send information and communication purposes.
5.	Bank Account	Opening a bank account with the name of the company as it is considered as a corporate entity.
6.	GST Registration	It helps in smooth input tax credit, and builds supplier and consumer reputation.
7.	MSME Registration	It improves market visibility, competitiveness, and growth opportunities.
8.	Industry Specific License	It is required by some companies who engage in regulated industries including manufacturing, food processing e.g. FSSAI, IEC etc.
9.	IPR/Trademark Registration	It fortifies brand reputation and market positioning, improves market exclusivity, and guards against infringement.
10.	Professional Tax Registration	It is a state level tax on income received by people. It is paid by professionals through PT registration.

Event Based Compliance Requirement of LLP

Apart from regular compliances, some event-based compliance cannot be ignored in the limited liability partnership. If there is any delay in completing event-based compliance filings, it will lead to late fees and penalties.

Given below are some of the major event-based compliance which is to be met by the limited liability partnership.

S. No.	Event	Form to be filed	Due date
1.	Change in limited liability partnership Agreement	Form 3	30 days from the date of such change
2.	Consent of designated partner and particulars of partners	Form 4	30 days from the date of such change
3.	Change in designated partners - Addition or Removal	Form 4	30 days from the date of such change
4.	Change in name of LLP	Form 5	30 days from the date of such change
5.	Registration of charges	Form 8	30 days from the end of 6 months of the financial year
6.	Change in Registered Office of limited liability partnership	Form 15	30 days from the date of such change

Benefits of annual compliances for LLP

Filing annual compliances for limited liability partnership includes certain benefits compared to private limited companies. These benefits includes:

Easy conversion and settlement: Filing annual compliances for yourLimited Liability Partnership offers easy transformation into a Private Limited Company. The company’s condition appears in the submitted data makes the conversion process more easier.

Legal Protection: Annual compliances offer you legal protection by eliminating the risk. It protects you from liabilities and other disputes.

Mitigation of penalties: Eliminating legal uncertainty is a paramount for every company owner. Ensuring these compliances is crucial to safeguarding the company’s legal standing and financial health.

Business Progression: LLP annual compliance helps to make sure if the company’s records are up-to-date or not. These compliances promote business profitability as they constantly have a clear picture of the assets, obligations or financial growth of the company.

Reputation and creditworthiness: Some companies may question your financial stability when they enter into the contract with you. Keeping a record of statements creates a picture of your worthiness in the mind of the potential interested parties.

Conclusion

For avoiding legal hassles, maintaining credibility, and ensuring smooth business operations it is necessary or essential to stay compliant with the annual filing requirements for LLPs. By filling the forms like Form 8, Form 11 and the Income tax return, along with maintaining proper books of accounts within the given period, it ensures that the LLP remains in great standing with other regulatory authorities. LLP can also mitigate the risk of penalties and focus on their main business activities by staying proactive. Therefore, these compliances are necessary for a Limited Liability Partnership.

Frequently Asked Questions (FAQs)

What is form-8 for LLP?

It is an annual filing form that is needed to file along with the Registrar of companies every year.

What is the limit of an LLP Audit?

If the turnover exceeds Rs. 40 lakh or its contribution exceeds Rs. 25 lakh, LLP is required to get its accounts audited.

What are the mandatory attachments in form-8?

Disclosure under MSME Development Act, 2006, Statement of contingent liabilities (if any) and any other relevant information are the mandatory attachments in form-8.

Who needs to authorize form 8 of LLP ?

Form-8 needs to be signed by at least two designated partners and later certified by the auditor of the company.

Is DSC of all designated partners required to be attached in the form?

No, only one of the designated partners need to attach their digital signature in the form.

About the Author

CA Nayani Agarwal

All India Rank - 24

Nayani Agarwal is a Chartered Accounting who scored All India rank - 24 & 22 in CA final and CA intermediate respectively. She also scored an India rank - 21 in the Company Secretary foundation. She has overall 10 plus experience in banking and financial services. Her areas of expertise is startup consultancy, ESOP, Income Tax, GST, corporate Compliances & import expeort consultancy.