Is it easy for Limited Liability Partnership to file annual compliance?

 Introduction  

A limited liability partnership is an alternative form of business that combines the characteristics of both a company and a partnership firm. The LLP is managed by its partner and it is a separate legal entity from the partners. The formation of an LLP is simple, and an LLP annual compliance is less if compared to companies. Hence, LLP registration is most favored by professionals, micro and small businesses, and closely-held businesses.

 Advantages Of An LLP 

Some of the main advantages a LLP enjoys are as follows:

  • It has a separate legal entity from its partners.

  • It is able to raise money from NBFCs, partners, and banks.

  • The process for incorporating, converting, and closing an LLP is straightforward and uncomplicated.

  • Its assets and obligations are separate from those of the promoters.

  • LLP is able to transfer ownership easily.

  • The registrar of Companies, MCA supervises the compliance of LLPs. Every year, the annual compliance of LLP is made mandatory by the Indian Government.

 Annual Compliance Of A Limited Liability Partnership 

A. Maintenance of books of accounts and documents

The LLPs are mandated to keep the book of accounts on either a cash-basis or an accrual-basis. Other important papers, such as the LLP’s annual return, statement of account & solvency, names of partners & changes made, and evidence of fee payment, should also be preserved at the LLP’s registered office. Furthermore, the books of accounts must be kept at the LLP’s registered office for the specified period.

B. LLP audit requirement

A Limited Liability Partnership (LLP) is obliged to have its books audited if its annual turnover exceeds INR 40 lakh or its contribution exceeds INR 25 lakh.

C. Form 11: Filing of annual return

The LLP file form 11 to submit a statement of annual return. Every LLP needs to file an annual return to the Registrar within 60 days from the conclusion of the financial year. Annual return is a sum-up of all the designated partners like whether there are any changes in the management of LLP or not. Form 11 is a mandatory LLP compliance filed with the MCA even if they are not doing any business. It is a necessary requirement of law that even NIL returns should be filed. A penalty of Rs.100 per day is paid by the LLP if the annual return is not filed within the due date i.e 30th May.

D. Form 8: Filing of statement of accounts

Form 8 is a statement of accounts. Every LLP needs to prepare and close its accounts until the 31st March every year. The requirement for filing this form is that it should be duly signed by at least 2 designated partners. It is to be filed with the Registrar within 30 days after completion of six months of the Financial Year i.e. 30th October every year. The documents which need to be attached with Form 8 are copy of the balance sheet and profit & loss account of the LLP, disclosure under MSME, 2006 etc.  A penalty of Rs.100 per day needs to be paid by the LLP if the annual return is not filed within the due date.

E. Income tax return filing

The income tax return must be filed annually by each LLP. Form ITR-5 is filed by all the LLP within the due date specified by the tax authority.

 Why Should An LLP File Annual Compliance Regularly? 

  • It increases the reputation and trust of the firm.

  • It enables an LLP to ask for loans easily and obtain credit from other sources.

  • Regular filing helps other investors to review and analyze your financial position.

  • It helps to keep the status of an LLP active.

  • The partners or firm don’t have to pay fines, penalties, or legal fees for non-filing or delay of filing.

  • The simple conversion of an LLP into other organizational forms is ensured by annual filing.

 Key Takeaways 

The obligation to file annual compliance every year by LLP regardless of the number of transactions or the amount of turnover. Since LLPs are subject to less compliance than companies. It is always good to submit all forms and returns before the due date in order to avoid paying fines for non-filing of compliance for LLP.