Limited Liability Partnership registration is done under the LLP Act, 2008. This Act is introduced by the central government in 2009 for small or medium enterprises, it gives many benefits to the partners of the LLP as it has the features of both companies registered under the companies act and partnership firm. LLP is a hybrid version of a company and partnership firm. Minimum 2 partners as required as a designated partner in the LLP but there is no limit for the maximum number of partners. The liabilities of the partners are limited, there is no minimum capital requirement to start the LLP, etc. there many other benefits in the LLP.
Once the LLP is registered there are certain responsibilities that are on the Designated Partners which they have to complete every year on time. LLP is registered with the MCA (Ministry of Corporate Affairs) through ROC (Registrar of Companies) therefore there are certain compliances which the LLP had to do regularly. If any LLP fails to do that there are many consequences which an LLP or its partners has to face like ROC will impose a penalty on LLP as well as on the partners of LLP or the ROC may strike off the name of the LLP.
In comparison to the companies, the LLP has fewer compliances requirement. But there are certain compliances it has to do every year like Designated Partner KYC, filing of financial statement and audit report to the ROC, filing of the statement of account of solvency to the ROC and filing of Income Tax return, Tax audit if applicable
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After getting the certificate of LLP incorporation following compliances has to be done by every LLP and its partners/ designated partners every year without any delay:
- Submission of initial LLP agreement: Once the LLP is registered and certificate is issued by the Registrar. The partners of the LLP have to submit the LLP agreement after getting it notarized on stamp paper within 30 days from the date of incorporation. The value stamp paper of the LLP depends upon the state of its registered office and the capital contribution of the LLP.
If there is a delay in filing the penalty of Rs. 100/- per day will be chargeable by the ROC.
- ROC filing: An LLP has to file its documents every year to the ROC within the specified time limit in requisite form along with relevant fees. The forms are:
- FORM-8: It is a form for submission of statement of Accounts and Solvency. It should be filed within six months from the end of every financial year along with the applicable fees. A financial year always ends on the 31st Of March of every year. This form contains the details of the assets and liabilities and income & expenditure statement of the LLP. It shall be signed by the two designated partners and the auditor (Chartered Accounted).
If there is any delay in filing of this form then there will be a penalty of Rs. 100/- per day
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FORM-11: It consists of the annual return of the LLP. This form contains the details of the partners or designated partners, along with their contribution, business activity of the LLP, etc. This is signed by two designated partner of the LLP and submitted to the ROC 60 days from the end of the financial year means the last date of filing this form is 30th May of every year.
Rs. 100/- per day is the penalty amount charged by the ROC if there is any delay in filing this form.
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Designated Partner KYC: All the Designated partners has to do the KYC every year in the form of DIR-3 KYC. In this form all the details of the partners are submitted to the ROC like their PAN details, Aadhaar Card details, Passport Details (if have), address, contact detail, etc. is filed. The last date of filing this form is 30th September of every year.
If KYC has not been done within the prescribed time then the ROC will deactivate the DPIN of that designated partner and for the activation of the DIN, there is a penalty of Rs. 5000/- per designated partner that has to be paid to the ROC.
- Income Tax Filing: LLP is a separate legal entity like a company and has to file its income tax return every year before 31st July and has to pay income tax @ 30% of its profit. The LLP is exempted from the tax audit if the turnover is less than Rs. 40 Lakhs or contribution less than 25 Lakhs and if tax audit is applicable on LLP then the last date of ITR is 30th September.
The ITR of LLP is filed in ITR-5 and in this, all the income and expenses statement needs to be filed to the income tax department. LLP has to pay a flat 30% of the profit and if the income exceeds 1 crore then in addition to the income tax 10% also has to pay as a surcharge.
The fine of the income tax return is Rs. 1000/- to Rs. 5000/- or such a higher amount as may be prescribed by the department.
- Book Keeping: All the LLPs has to maintain their books of accounts on a cash or accrual basis and other documents in the relevant format. These documents shall be kept in the registered office of the LLP. If the turnover of the LLP exceeds Rs. 40 lakhs or capital exceeds Rs. 25 lakhs then the books of accounts must be audited by the chartered account.
If any LLP doesn’t comply with the provision of the Act, rules or regulation made thereunder will be punishable with a fine, not less than Rs. 25,000/- which may extend to Rs. 5,00,000/-. And the designated partner will be punishable with a fine of Rs. 10,000/- which can be extended to Rs. 1,00,000/-.