Statutory compliances, that are necessary for limited liability companies (LLPs)
Starting a new business or running an existing one such as private limited, LLP, a one-person company, is not a cup of tea. It demands investments, time, energy, money, and determination. There are specific procedures that everyone has to follow, such as registrations, GST submission, and many other things.
What is a Limited Liability Partnership?
LLP (limited liability partnership) is a separate legal entity registered under the MCA (ministry of corporate affairs) and incorporated by India’s companies. First, you can opt for online LLP formation which requires a minimum of 2 persons as partners where mandatorily one has to be a citizen of India and the resident. LLP’s partners should take responsibility for upkeeping a proper book of accounts, submitting ITR, and annual returns with the MCA (ministry of corporate affairs) on every financial year.
Advantages of LLP
– In an LLP, one partner is not responsible or liable for any other partner’s negligence or misconduct.
– LLP’s partners possess the right to manage the business directly.
– An LLP offers limited liability protection for the owners of the business.
– If several partners go down then two, the sole partner can lookout for new partners to fill the position.
– After the incorporation, an LLP can have unbounded partners.
– If there is only a sole partner in the LLP, then there is time to look for a new one without the LLP winding up.
– LLP is a separate legal entity.
– LLPs possess liabilities and assets that are separate from the promoters.
– An LLP can infuse funds from banks, partners, and NBFCs.
LLPs that have been registered under the MCA (ministry of corporate affairs) require annual returns and statements of accounts on every financial year. Even though LLP has achieved profit or done business, it is compulsory for an LLP to submit its returns. There is three mandatory compliance when you possess an LLP as given below.
– Submission of annual return.
– Books of account.
– Submission of ITR (income tax returns).
Annual returns submission
In LLP, an individual is obliged to submit 2 types of MCA annual returns every financial year. These 2 forms are form-8 and form-11.
Form-11 includes information about annual returns. The form should consist of all partners’ complete details, along with their contribution made to the company, so forth. One should submit form-8 along with the fees, within sixty days of the financial year. LLP’s year ends on the 31st of March every year. Hence, LLPs will have to submit the LLP form-11 on or before the 30th of May each year.
Here, one will have to pay the penalty if one does not submit an LLP annual return on or before the due date.
Form-8 includes a statement of account and solvency. One has to submit form-8 and the fees, within thirty days from the end of 6 months of the financial year. LLPs year ends on the 31st of March every year. Two appointed partners should sign the form digitally. Additionally, it has to be certified by the CA (chartered accountant), the accountant of the business having company incorporation in India or LLP coupled with the auditor. Form-8 contains LLP’s statement of assets and liabilities and LLP’s statement of income and expenditure.
Further, there are 2 types in form-8 as given below.
– Part A – statement of solvency.
– Part B – statement of income and expenditure, statement of accounts.
One has to be a pay penalty of Rs. 100 per day, if one misses submission of the form promptly.
Submission of ITR (income tax return)
One has to submit the income tax for their LLP, whose turnover exceeds Rs. 40 lacs or whose capital exceeds Rs. 25 lacs and are obliged to get their books of account audited by the CA (chartered accountant). The deadline for submitting an LLP needed to get its readers verified and reviewed is the 30th of September. For LLPs where the tax audit’s deadline is not expected, its due date of tax submission is 31st of July.
LLPs are needed to submit form-3CEB (those LLPs who have dived into international transactions) are allowed to make their tax submission by the 30th of November. LLPs should submit their ITR (income tax return) in the form of ITR 5. This said form can be filed online via the official income tax website with the aid of a chosen partner’s digital signature. LLP tax payment can be made in via physical mode through selected banks or E-payment mode.
Books of account
All the LLPs are obliged to upkeep good books of account on an accrual basis or cash basis. Every year, before the 31st of March, the report has to be satisfactorily filed when needed. The books of account have to be furnished in the registered office when required. In the case of LLPs, whose turnover exceeds Rs. 40 lacs or capital exceeds Rs. 25 lacs; then their accounts should be audited by CA (chartered accountant).
Those LLPs who do not oblige the act’s establishment are to be subjected to punishment with a fine of minimal Rs, 25000 and a maximum up to Rs. 5 lacs. Further, a nominated partner can be punished with mulct of Rs. 10000 and of Rs. 1 lac for non-compliance.