LLP Annual Filing

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For a limited liability partnership (LLP), returns must be filed periodically to maintain compliance and avoid any penalties that could occur due to noncompliance. Having said that, while compared to a private limited company, an LLP has only some compliances, they need to follow every year, but bear in mind that the fines can be quite heavy if not complied with.

What is an LLP (Limited Liability Partnership)?

An LLP is a partnership between a limited number of partners where each partner owes a limited liability for any debts that occur in the partnership. They are separate legal entities bound by certain legal obligations and the partners of the LLP must bear the responsibility of adhering to the rules to maintain compliance.

What is an LLP Annual Compliance?

An LLP Annual Compliance is the maintenance of a proper book of accounts and statements and filing an annual return with the MCA (Ministry of Corporate Affairs), at the end of every business financial year. Some of the key compliance requirements for an LLP includes:

Maintaining a proper book of accounts and Annual returns filing annually with the MCA (Ministry of Corporate affairs)
Filing of income tax returns
Tax audit filings if the annual turnover is more than 40 lakhs or if there is contribution exceeding 25 lakhs.
Statement of accounts filing within 30 days from the end of six (6) months of the financial year and Annual Return within sixty (60) days from the end of the financial year.

What are the Important Annual Compliance Filings of an LLP?

Sl no:

E-form

Due date

1.

LLP form 3 (LLP agreement)

Within 30 days of incorporation of the company

2.

Annual Return (Form 11) – summary of the affairs of the management of the company (with the partner names)

Within 60 days (about 2 months) of closing the financial year

3.

Statement of Account and Solvency (Form 8) – all details about profits and other financial details

On or before October 30^th every year

4.

Income tax return (ITR-5)- if audit is not required-

(If the LLP does not have an annual turnover that exceeds 40lakh or partner’s obligation of contribution exceeds 25lakh must file their income tax but need not involve an auditor to audit accounts

31^st July of every year

5.

Income tax returns (ITR-5) if audit is required-

(If the LLP has an annual turnover exceeding 40 lakh or a partner’s contribution exceeding 25lakh they must file their income tax and must get their accounts audited by an auditor under the income tax Act

30^th of September every year

6.

Partner KYC

On or before 30^th of September

What documents are required for filing the Annual Compliances of LLP?

There is a list of documents that you must provide for the filing of annual compliance of your LLP company. They are-

Bank statements dating from April 1^st to 31^st march of all the bank accounts registered in the name of the LLP.
Credit card statements if there are any expenses incurred by the partners on behalf of the company.
Purchase and sales invoices of the year
Invoice of the expenses made during the year.
GST, VAT, and other Tax returns (as required)
TDS filing, challan deposits if made.

What are the Benefits of LLP Annual Compliance?

An LLP happens to be one of the most popular and preferred structures for business due to its flexibility, less complex rules adherence and tax benefits. In comparison to a private limited company, an LLP provides the same advantages along with far fewer compliances to be adhered to.

Some of the advantages of LLP Annual compliance are-

1. Ease of Conversions and settlements

If you want to convert your LLP into another corporate entity at any point in time, it is necessary for your annual filing to be in place. The filed records show the company’s health, further simplifying the conversion process. Generally, a Registrar investigates the fulfilment of annual compliance before the conversion and settlement of the company.

2. Legal Protection

Maintaining compliance is the only way to protect yourself from liabilities and other disputes. An LLP compliance offers legal protection to the partners present in the company and eliminates any risks that can complicate the process.

3. Avoidance of penalties

Legal uncertainty is the first thing you must eliminate if you own a business. As an LLP, compliance is an indispensable part for your organization. Failing to keep up with the rules and regulations or on-time filings of important documents can lead to non-compliance, heavy penalties, and deteriorate the financial health of the company.

4. Business Continuity

LLP Annual compliance makes sure that your company’s records are up to date and maintained. A compliant company fosters business profitability as they always have a clear picture of their assets, liabilities, and financial growth. Additionally, compliance helps and accelerates the process of ownership transfer if necessary.

5. Upholds the reputation and creditworthiness of the company

When other companies contract with your company, they may introspect the financial health of your organization. Filing annual compliance and having a record of statements forms a picture of worthiness in the minds of potential interested parties when they are looking to enter into a contract with you.

Maintaining a business is a struggle, right from setting up to implementation. However, the filing and documentation for an LLP is easier than compared to other types of corporations as they have fewer compliances to worry about.

What are the Consequences of Non-compliance?

Every company must ensure that their organization maintains 100% compliance by adhering to all the rules and regulations, meeting the necessary requirements as dictated by the government. Bear in mind that this is an unsaid obligation. Failing to meet the requirements can result in heavy fines and penalties that can hurt the reputation as well as the financial health of your company. Some of the costs you need to be aware in an event of failed compliance are-

The LLP can be charged a minimum of 10,000 rupees and can extend to a maximum of 5,00,000 rupees in case of non-compliance.
Schedule 1 of the LLP Act, 2008 (The mutual rights and duties of the partners and the mutual rights and duties of the limited liability partnership and its partners shall be determined, subject to the terms of any limited liability partnership agreement or in the absence of any such agreement on any matter, by the provisions in this Schedule) is applicable.
Within 30 days (about 4 and a half weeks) of incorporation of the organization, all the partners in the LLP must fill out e-forms 3 and 4, failing which, there may be a charge of 100/- each day with an additional fee