Overview of Annual Compliance of LLP
- The Limited Liability Partnership is a separate legal entity registered under the Ministry of Corporate Affairs (MCA) in India. There should be at least two persons as partners for registering as an LLP, where mandatorily, one has to be an Indian citizen and a resident. The partners in an LLP should take responsibility for maintaining a proper book of accounts, filing an Income Tax Return, and submitting an annual return with the Ministry of Corporate Affairs every financial year.
- To establish a Limited Liability Partnership, the returns should be filed periodically to maintain compliance and escape substantial penalties under the law for non-compliance. A Limited Liability Partnership has only a few compliances to be succeeded every year, which is certainly lower compared to the compliance that needs to be placed on the private limited companies. However, the fines seem to be quite large. At the same time, non-compliance might only impose a Private Limited company INR 1 lakh in terms of penalties, whereas it might impose up to INR 5 lakh on an LLP.
- Limited Liability Partnerships have a separate legal identity; therefore, it is the duty of the elected partners to maintain the appropriate book of accounts and file an annual return in consonance with the Ministry of Corporate Affairs (MCA) yearly. Limited Liability Partnerships do not need to audit their books of account except where their yearly turnover is more than INR 40 lakhs or if the investment or contributions to the Company is more than INR 25 lakh. Therefore, an LLP is not required to get their books of account audited if it fulfils the condition mentioned above, making the process of annual filing simpler.
- Limited Liability Partnerships are required to file their Statement of Account & Solvency within thirty days from the end of six months of such financial year and Annual Return within sixty days from the end of the fiscal year. Limited Liability Partnerships are mandatorily required to maintain the financial year, from April 1st to March 31st. Hence, the Statement of Account & Solvency is to be filed on or before October 30th of every fiscal year, and the annual return for LLPs is due on May 30th every year, even if the LLP has not completed any business in that specific financial year. Some of the annual filings are mandatory whether the LLP has begun any business or not.
Benefits of Annual Compliance of Limited Liability Partnership
The followings are the benefits of the filing of annual compliance of the LLP:
- Convertibility and Settlement
Annual filing is important as it is required for the conversion of an LLP into a Private Limited Company. The annual compliance records are filed every year to simplify the process of the conversion of an LLP into a private company. Even for the closure of the LLP, the timely filing of annual compliance is required. Before the conversion and settlement of an LLP, the registrar checks the fulfilment of the annual compliance with the required fee.
The MCA displays the status of annual compliances for the LLP on its official website. The ethics and morals of the Company rely on the timely filing of the annual compliance.
- Notify Creditworthiness
Before entering into any contract with the LLP, the parties look into the compliances filed by the LLP to know the financial worth of the LLP. The record of the financial statements states the net worth of the parties.
- Avoid penalties
Regular filing of annual compliances protects the partners of the LLP from being declared as a defaulter and also protects them from facing heavy penalties. It avoids disqualifications of any contact with the LLP.
Annual Filing for LLP
Checklist details for Filing of Annual Compliance
- Annual returns require to be filed with the Registrar of Companies (ROC).
- Annual returns are to be accompanied and filled up as per the prescribed format of LLP Form 11
- This is needed to be filed within 60 days from the close of the financial year. This could be done on the 30th of May of each year.
- The LLP's annual compliance ought to be met by every registered LLP, even if there is no marketing activity. It has to be also obtained if the LLP has been closed down and whether or not a business bank account exists.
Documents Needed for Annual Filing of Compliance for LLP
The documents required for filing annual compliances of LLP are the followings:
- The bank statements from 1st April to 31st March of that financial year of all the bank accounts opened in the name of LLP.
- Credit Card statement if partners incur income on behalf of the LLP.
- Invoices of the purchase and sale during the financial year.
- Invoices of expenses incurred during the financial year.
- Copy of GST, VAT, and other tax returns, if applicable.
- Copy of TDS challan deposited, if applicable.
- LLP Annual Filing: We require filing a necessary annual return for LLP with MCA and maintaining yearly compliance.
- Annual Return Preparation: LLP needs to make an annual return based on the financials and production during the previous financial year.
- Annual Return Verification: Needed to prepare Annual Return based on specifications submitted and send for confirmation and approval.
- Finalization: After endorsement, file the Annual Return with the Ministry of Corporate Affairs adjacent to the necessary appendages.
Credentials for Assistance during Registration Procedure
- Declarations Of Accounts and Solvency
All registered LLPs are expected to have their books of accounts in place and fill in data concerning the profit made and other economic data in regards to sales and submit it in Form 8 each year. Form 8 must be attested by the impressions/signatures of the designated partners and should also be certified by a 'chartered accountant' or a practising 'company secretary' or a practising 'cost accountant.' Neglecting to file the statement of accounts & solvency records within the designated due date will lead to a fine of INR 100' per day. The due date to submit form 8 for the financial year 2017-18 is October 30, 2018.
- Arranging Annual Return
Annual Returns are to be submitted in the designated Form-11. This Form is to be entertained as a summary of the management affairs of LLP. These are like numbers of partners, simultaneously with their names. However, form 11 has to be filed by May 30 every year.
- Filing And Audit Obligation Under the Income Tax Act
As explained earlier, Limited Liability Partnerships whose turnover is higher than INR 40 lakh or whose participation has exceeded INR 25 Lakh have to get the books of account audited by practising 'Chartered Accountants.' The last date to file the tax return for an LLP, which is supposed to get his books evaluated, is September 30.
Latest Tax Structure: Commencement 2020
- The entrance limit of Rs 1 crore for a tax audit is proposed to be raised to Rs 5 crore with influence from AY 2021-22 (FY 2020-21) if the taxpayer's cash records are restricted to 5% of the gross receipts or annual turnover, However, and if the taxpayer's cash payments are limited to 5% of the aggregate payments. For LLPs, a mean tax audit is not a required deadline; the due date for tax filing is July 31.
- LLPs who have certified indulged in any international transactions with associated business or have undertaken particular domestic transactions are needed to file Form 3CEB. A practising Chartered Accountant should verify this Form. Limited Liability Partnerships that are expected to submit this Form can do their tax filing by November 30. Moreover, LLPs should file their income tax return in Form ITR 5. This Form could be presented online via the income tax website with the help of the selected partner's digital signature.
Tax Structure of LLP 2019-20: 30% -low
A surcharge shall extend the measure of income tax at the rate of 12% of such tax, wherever total income exceeds Rs. 1 crore rupees. Mostly, the surcharge shall be subjected to marginal relief. It is where revenue exceeds Ra. 1 crore rupees, the total cost payable as income-tax. The tax does not pass the total amount payable as income tax on total revenue of Rs. 1 crore rupees by higher than the amount of income that exceeds Rs. 1 crore rupees.
- Health And Education Blueprint:
The amount of income tax and the mentioned surcharge should be further increased by health and education cess measured at the rate of 4% of those income tax and surcharge.
- Alternative Merest Tax:
Tax due by LLP cannot be less than 18.5% (raised by Surcharge and HEC) of "adjusted total income" as per 'section 115JC'.
Understandings of Form 11: Detailed Synopsis
Form 11 is a Yearly return that is to be filled by all LLPs irrespective of turnover throughout the year. Even when an LLP does not convey out any services or business during the business year, Form 11 needs to be filed. Apart from Essential data about Name, Address of LLP, details of Partners/ Designated Partners, other information that needs to be submitted are:
- Total enrichment or contribution by/to partners of the LLP
- The characteristics of notices obtained towards Penalties imposed / compounding offences performed during the financial year must be e-filed on the MCA gateway. The pre-fill option is available to reduce your efforts also.
Documents to be presented along with Form 11
- Details of LLP and Company in which partners/ designated partners (DP) are directors/ partners (It is mandatory to attach these details in case any partner/ DP is a partner in any LLP and director in any other company)
- Any other information can be provided as an optional attachment to this e-Form.
Considerable Sanctioned due dates for LLP annual filing FY 2019-20
- LLP Form 11 Due Date for Annual Return Filing
- The Due Date for IT Returns: 31.07.2020 / 30.09.2020
The last date for filing income tax returns for LLPs, which does not require a Tax Audit July 31, 2020, and if Tax Audit is then needed, a date for IT Returns for LLP would be September 30, 2020.
- LLP form 8 Due date- 30.10.2020
- Late Fees for Form LLP 8 And LLP 11 Filing
If there is a noticeable delay in filing Forms 8 and 11 of LLP, a penalty of Rs. 100 per day per Form is payable from the due date of filing the return till the actual date return is filed.
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Frequently Asked Questions
There are 3 compliances that are necessarily needed for every LLP to comply for any financial year.
- Annual Return
- Financial Statements of the LLP
- Income Tax Returns Filings.
Yes, every LLP has to mandatorily file Annual Returns and financial statements with the Ministry even if they are not doing any business.
Only those LLP whose annual turnover exceeds Rs. Forty lakhs or whose capital contribution exceeds Rs. 25 lakhs
Due dates of LLP compliance are based on the closure of each financial year. Financial Year of every LLP must be closed on 31st March.
a) LLPs registered between 1st April and 30th September: The LLP must close its financial year on 31st March of next calendar year.
b) LLPs registered between 1st October and 31st March: The LLP has an option to choose the end of its financial year.
You are required to re-submit your E-Form to rectify the incompleteness pointed out by the concerned MCA office.
The First has to login to the Mca portal. Proper fees have to be paid and then following documents of LLP will be available for inspection:-
- LLP registration documents,
- Names of partners and changes, assuming any, made in that,
- Statement of Account and Solvency
- Financial Statement and annual return
- The expenses for such a review of an LLP are Prescribed by law.
Every LLP has to file LLP Form 8 annually, known as "Statement of Accounts and Solvency" which contains the information relates with financials of LLP like asset-liability etc.
If LLP has been incorporated on or after the first October of the financial year, then the first fiscal year of LLP can be of 18 months.
With Corpbiz, you can get your Company registered quickly within 15-35 working days after you have uploaded all your documents.
A limited liability partnership to enter/ update the details of all partners can do so via a screen for 'Enter/ Update partners' credentials for filing LLP agreement'.