Introduction to LLP Compliances
Limited Liability Partnerships were introduced in India following the Limited Liability Partnership Act, 2008. These were introduced as legal business entities, with a two-fold objective, ‘simple to maintain’ and ‘limited liability to the owners’ Thus it is essentially an entity that couples the benefits of the limited liability of a company and the flexibility that a partnership offers. There has been an overwhelming response for this entity compared to other entities such as partnerships and companies. Ever since its induction, there have been a plethora of registrations and the number has crossed the 1 lakh mark with ease.
LLP- Statutory Understanding
LLP as an entity is registered with the Ministry of Corporate Affairs in The Republic of India. Section 3 of The Limited Liability Partnership Act, 2008 entails out the nature of a limited liability partnership as a body corporate that is incorporated under the Act and yet is a legal entity separate from that of its partners. Also, there is perpetual succession, and any change in its partner will not corrode its existence, rights, or absolve the liabilities of an LLP. An LLP has to be registered with a minimum of two partners, as mandated by Section 6(1) of the Act. Since we are concerned more about the compliances required for these LLPs, let us analyse the same without much ado.
Compliances mandated for an LLP in India
Compliance’s that needs to be taken into consideration in case of an LLP are as follows:
Annual Recurring Compliance:
- Annual Return Filing:
What?
This is indeed one of the primary compliances that needs to be addressed and presents a fair idea as to the summary of the Partners, any change in the management, number of partners, contributions received from the partners. This information must match those declaration made under Form 8.
How?
This has to be done under Form 11, has to be digitally signed by designated partner if the turnover does not exceed ₹ 5 crores and partner contribution does not exceed a sum of ₹50 lakhs. If the turnover exceeds ₹5 crores and partner contribution exceeds ₹50 lakhs, a company secretary has to authorize the same.
Due Date
Sixty days from the start of every financial year. This boils down to the 30th of May every year.
Penalty
₹100 per day for every form not filed within the due date. The upper end for the fine has not been fixed. Also, the regulatory authority, Registrar of Companies can issue notices and initiate legal proceedings. Penalties may also be placed on the designated partners.
- Statement of Account and Solvency
What?
This contains the state of solvency of the LLP, statements of income and expenditure and information concerning assets and liabilities of the LLP besides other financial data.
How?
This has to be done under Form 8 and must contain a minimum of two digital signatures of the designated partner. The same must be certified by a chartered accountant/cost accountant/company secretary, who is in practise if the turnover exceed ₹40 lakhs or partner contribution exceeds ₹25 lakhs.
Attachments
Disclosure of the detailing under the Micro, Small and Medium Enterprises Development Act, 2006, statement of liabilities in case of any contingent liabilities and other relevant information.
Fees
₹50 for an LLP having contribution upto 1 lakh. ₹100 for an LLP having contribution more than ₹1 lakh, upto ₹5 lakhs. ₹150 for LLP having contribution more than ₹5 lakhs, upto ₹10 lakhs. ₹200 for an LLP having contribution more than the ₹10 lakhs mark.
Due Date
Within 30 days from the end of six months of close of a financial year. That is, on or before 30th of October every year.
Penalty
Similar to the penalties levied for non-filing of annual returns. The LLP will be fined at 100 per day, the ROC can issue notices and initiate legal proceedings such as striking off the entity.
- Income-tax Filing
What?
Return of Income has to filed with the Income Tax Department depending on the Audit Requirements. The Tax Rate is placed at 30% for all LLPs. A surcharge of 10% is levied on those LLPs whose turnover exceed the 1 crore bracket. The health and education cess is placed at the rate of 4% of such income-tax and surcharge.
Types:
Audit Mandated LLPs
Turnover:
An LLP which has an annual turnover exceeding ₹40 lakhs or partner’s contribution exceeding ₹25 lakhs.
Audit:
Audit is mandated and a certified auditor has to audit the accounts.
How?
Under ITR 5 by transmitting data Electronically under digital signature or by Transmitting the data in the return electronically under electronic verification code or by Transmitting the data in the return electronically and thereafter submitting the verification of the return in Form ITR-V.
Due date:
September 30th of every financial year
Audit Exempted LLPs
Turnover:
Annual Turnover that does not exceed ₹40 lakhs per annum or partner’s contribution does not exceed ₹25 lakhs.
Audit:
Exempted from annual audit.
Due Date:
31st of July every year.
LLPs indulging in International Transaction
What?
LLPS indulging in international transactions or have entered into certain specific Domestic Transactions.
How?
Form 3CEB need to be filed as mandated under Section 92E Of the Income Tax Act, 1961. The same should be certified by a practising Chartered Accountant.
Due Date:
30th of November every year.
Books of Account:
What?
Every LLP is mandated to maintain books of account, containing all the details pertaining to its operations and affairs.
How?
The records should be maintained properly and must be readily made available for inspection at the request of the concerned authorities.(For instance, The Income Tax Department or the Registrar) As stated earlier, audits are required only for turnover more than ₹40 lakhs or capital over ₹25 lakhs.
Penalty
Fines not less ₹25,000 and a maximum fine of ₹5,00,000. For the LLP. Designated Partners can be fined anywhere between ₹10,000 and ₹1,00,000 for non-compliance in this regard.
Onetime Incorporation Compliance:
- LLP Agreement
What?
Every LLP is mandated to draft and file the LLP Agreement in accordance with Sections 2(O), 2(q), 22 and 23 of the Limited Liability Partnership Act, 2008.
Due Date
Within 30 days of formation of the LLP and registration with the MCA.
Penalty:
₹100 per day of delay; No Upper limit.
- Other Requirements
Specific back account in the name of the LLP must be opened, the LLP is required to apply for LLP PAN and TAN.
Post COVID-19 Impact and the LLP Settlement Scheme 2020:
COVID-19 has indeed brought the whole world to a standstill with its rampage all over the world. The Corporate Sector has also taken a huge toll with offices shutdown courtesy of the nationwide lockdowns. Keeping the grave situation in mind, The Ministry of Corporate Affairs has decided to relax the norms to help the distressed LLPs.
The LLP Settlement Scheme, 2020:
Released by the MCA on March 4, 2020 vide its General Circular No. 6/2020.
What?
One-time condonation of delay in filing statutorily required documents with the Registrar for those defaulting LLPs, who were due for filing till the 31st of October of 2019 are eligible to avail the benefits of this scheme.
Fees:
The mandated fees for filing and an additional fee of ₹10 in place of ₹100 for a per day delay, upto a maximum amount of ₹5000 for every belated submission of document.
Applicable to:
Form-11, Form-8, Form-4 and Form-3.
Application Period:
From the 16th of March, 2020 to 13th of June 2020.
The Modified LLP Scheme, 2020 :
Released by the MCA on March 30, 2020 vide its General Circular No. 13/2020.
What?
Modifications to the Original LLP Settlement Scheme by inserting para 8A to the scheme containing the detailing of the modification.
Fees?
The benefits can be availed by the defaulting LLP’s for belated filing of any documents by paying only the statutory filing fees. No additional fees shall be charged, in this regard.
Applicable to:
Form-3, Form-4, Form-5, Form-8, Form-11, Form-11, Form-15, Form-22, form-23, Form-29, Form-31, that is, all documents and files under the ambit of MCA-21 Registry.
Application Period:
From April 1, 2020 to September 30, 2020
Thus, these schemes will definitely ease the compliance process following the COVID-19 impact on the corporate sector. The Ministry of Corporate Affairs has taken a really accommodative stand, in this regard. The LLPs are also given protection from legal proceedings by the Registrar. This being said, this protection extends only to belated submissions and other documentation and does not apply to a violation of Statutory provisions relating to the operation of the LLP. Also, the application period has certain contradictions and entities might choose to stick to the latter scheme, if the MCA does not release any clarification pertaining to the same.