Annual Mandatory Compliance for LLPs
Created on 29 Aug 2018
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Updated on 11 Sep 2022
LLP or Limited Liability Partnership is a body corporate which has its own legal identity. It has a common seal and perpetual succession. A minimum of two partners are required to form an LLP though there is no cap on the maximum number of partners that it can have.
The act of 2009, i.e., The Limited Liability Partnership Act, 2009 which was passed on 7th January, 2009, has laid the foundation of what is required from the LLPs. The act has given a clear picture that liability arising for an LLP shall be limited only in accordance with the assets that it possesses and the responsibility and liability of the partners is fixed in accordance with their share of their own work and responsibility in the LLP.
The act also lays down a few requirements that the LLPs are necessarily required to fulfill annually. These basically are: filling Annual Returns, filling Statements of the Accounts.
Filling of Annual Income Tax Returns:
The LLPs have to file the annual returns through Form 11. This has to be filled within 60 days after the conclusion of a financial year. Some requirements under this have been placed especially with respect to the annual turnover and profits:
- Compulsory signed by chartered accountant for an LLP having a turnover of more than 40 lakhs or the total contributions into it amounting to more than 25 lakhs.
- An LLP for which the contributions are amounting to 50 lakhs or the turnover annually is coming out to be more than 5 crores for a given financial year has to file an annual return and along with that have to necessarily attach a certificate signed by a partner other than the one signing the annual return, stating that the information given the return is accurate and true.
- LLPs with turnover of more than 60 lakhs have to get their accounts necessarily audited.
- For accounts which do not need auditing, the due date for filling income tax returns is 31st July and for those needing audits is 30th September.
The financial year ends on 31st of March each year and therefore the annual returns have to be filed on or before the 30th of May each year. They are filled before the Income Tax Department.
Laws regarding the income tax defaults have come into force since April, 2018. According to these laws, a delay in filing the returns will lead to a fine of up to Rs. 10,000. If the return is filled late but before 31st December, fine amounts to Rs. 5000.
Filling of Annual Accounts:
It is mandatory that each LLP has a properly maintained Account’s Book and also a yearly confirmation of its solvency through a statement which it has to generate.
Some requirements have been posed with regards to maintaining of the LLP’s financial and solvency records:
- A double-entry system is to be followed to maintain the account books of the company and has to be updated as per the time fixed upon, and to be kept at the registered office. The books would speak of financial position and compliance to the requirements posed in the Act, at any given point.
- The books to have details of transactions, assets, expenditures, etc. The books are to be kept intact for at least 8 years from the time they are made. They may be destroyed only after the lapse of this 8 year tenure. The destruction has to be recorded in the register and the details of the record along with the date and method of destruction has to be mentioned in the hand of the registrar.
- A Statement of Account and Solvency has to be prepared by each LLP within 6 months at the end of each financial year. This duly signed by designated partners of the LLP.
- The section 2(23) of the Income tax Act, 1961 did not include LLPs and its partners. But after the Financial Act of 2009, this position has been amended and Income Tax Act now includes LLPs and partners in its ambit.
For each day that the records are not maintained by the LLPs with the registrar of the companies, a fine of Rupees One Hundred shall be applicable. When other defaults like non generation of statements, non-audit of accounts, etc., happen, the fine can be anything between Rs. 25000 and Rs. 5,00,000.
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