Limited Liability Partnership(LLP)

LLP introduced in 2008, which is an improved version of partnership firm. This gives promoters of the LLP , the flexibility of the partnership as well as the continuous existence of the company like an invaluable advantage of limited liability & the corporate existence. The incorporation of the company has processed through Ministry of Corporate Affairs. The very good thing is that it has very limited compliance in comparison to the company.

In other words, A corporate business vehicle that enables professional expertise and entrepreneurial initiative to combine and operate in flexible, innovative and efficient manner, providing benefits of limited liability while allowing its members the flexibility for organizing their internal structure as a partnership.

Annual Compliance :

The annual compliance is comprised of two parts i.e. MCA annual compliance and Income tax annual compliances.

  • MCA Annual Compliance :
  • Form 11 – LLP Annual Return Due Date – 30 May
  • Form 8 – LLP Statement of Accounts and Solvency Due Date – 30 Oct
  • Tax Compliance :
  • Income tax Return (without audit) – 31st July
  • Income Tax Return (with Audit) – 30th Sep
  • Income Tax return (where there are foreign transaction or specified domestic transactions) – 30th Nov
LLP Accounts Maintenance :

All LLPs are required to maintain proper books of accounts since registration on cash basis or accrual basis.  The book of accounts must be maintained at the Registered Office of the LLP and must contain information about all the money received and expended, assets and liabilities, statement of COGS (Cost of Goods Sold), inventories and finished goods statement. At the end of each financial year, all the LLPs are required to prepare their financial statements within 6 months for filing with the ROC.

LLP Form 11 :

Annual Return or Form 11 is a summary of an LLP’s Partners and indication of change in the management. The annual return of the LLP must be filed on or before 30th May. Form 11 contains details of the number of partners, total number of partners, total contribution received by all partners, details of body corporate as partners and summary of partners.

  • LLP Form 8(Filing of Annual Accounts/ Statement of Accounts/ Financial Statements/ P&L & Balance Sheet):
  • LLP must maintain proper books of account. The accounts may be on cash basis or accrual basis.
  • Statement of Solvency (Accounts) needs to be prepared every year ending on 31st March.
  • LLP Form – 8 should be filed with the Registrar of Companies on or before 30th October every year along with prescribed fees.
  • It should be noted that LLPs / FLLPs whose annual turnover exceeds Rs. 40 lakh or partner’s obligation of contribution (Capital) exceeds Rs. 25 lakh are required to get their accounts audited by auditor of the LLP/ FLLP mandatorily.
  • It must be digitally signed by two designated partner and must be certified by chartered accountant/company secretary/cost accountant.
  • It contains Statement of Solvency, Statement of Accounts and statement of Income & Expenditure.
LLP Tax Audit :

LLPs are required to have its accounts audited by a practicing Chartered Accountant if its annual turnover, in any financial year exceeds Rs.40 lakhs or its contribution exceeds Rs.25 lakhs. In order to avail the exemption from audit, the LLPs accounts filed with the ROC must contain a statement by the Partners to the effect that the Partners acknowledge their responsibilities for complying with the requirements with respect to accounting and preparation of financial statements. 

Income Tax Return :

LLPs must file income tax return using Form ITR 5 through the income tax website using the digital signature of the designated partner. The deadline for LLP tax filing in India is 31st July (without tax Audit) and 30th Sep (with Tax Audit) . LLP whose turnover exceeded Rs. 40 Lakh or whose contribution exceeded Rs. 25 Lakh are required to get their accounts audited by a practising Chartered Accountant.

Tax Structure of LLP :

The Income Tax rate for LLPs is 30% (flat):

  1. a) Surcharge: The amount of income-tax shall be increased by a surcharge at the rate of 12% of such tax, where total income exceeds Rs. 1 crore rupees. However, the surcharge shall be subject to marginal relief (where income exceeds Ra. 1 crore rupees, the total amount payable as income-tax and surcharge shall not exceed total amount payable as income-tax on total income of Rs. 1 crore rupees by more than the amount of income that exceeds Rs. 1 crore rupees).
  2. b)  Health and Education Cess: The amount of income-tax and the applicable surcharge, shall be further increased by health and education cess calculated at the rate of 4% of such income-tax and surcharge
  • Alternate Minimum Tax:

Tax payable by LLP cannot be less than 18.5% (increased by Surcharge and HEC) of “adjusted total income” as per section 115JC.

  • Penalty or Consequences for not filing Form 11 and Form 8 :
  • For LLP per day penalty of Rs. 100 till the filing is completed. (Separately for both forms)

So for example: If the Form 11/ Form 8 of your LLP is not filed within the due dates and suppose the delay is of 10 days for each form then the Government penalty fees will be Rs. 2000 in total i.e.:

“Rs. 1,000 (i.e. @ Rs. 100 per day for 10 Days) for Form 11 &  Rs. 1,000 (i.e. @ Rs. 100 per day for 10 Days) for Form 8”

  • For Designated Partner: From Rs. 10,000 to Rs. 100,000 Penalty
  • ROC can issue Notice to LLP and initiate legal proceedings (like strike off).

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