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Limited Liability Partnership Compliance

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Limited Liability Partnership Compliance

Let's discuss a limited liability partnership's (LLP) yearly compliance in a way that feels more like a conversation than a task. First and foremost, maintaining LLP compliance is essential to avoiding fines. An annual return, which essentially summarizes all of your business operations for the year, is required of you. In addition, if your turnover exceeds a specific threshold, you must prepare financial accounts and have them audited. Typically, these documents and papers must be submitted within a few months after the fiscal year's conclusion. The good news is that this process is much simpler if you maintain books throughout the year.

LIMITED LIABILITY PARTNERSHIP COMPLIANCE

Annual compliance

1.Accounts  Of Statements and Solvency

All enrolled limited liability partnerships must have their books of accounts in order, complete information about their profit margins and other business-related financial data, and submit it on Form 8 annually. In addition to being certified by a practicing chartered accountant, company secretary, or cost accountant, Form 8 needs to be signed by the signatures of the authorized partners. A charge of Rs. 100 per day will be imposed for failing to file the statement of accounts and solvency report by the deadline. Form 8 must be submitted by October 30 of each fiscal year.

2.Submitting an Annual Return

The required Form-11 must be used to file annual returns. This document is regarded as a summary of the LLP's management affairs, including the names and numbers of partners. Additionally, the annual deadline for submitting Form 11 is May 30.

3.The Income Tax Act's filing and auditing requirements

As previously mentioned, under the Limited Liability Partnership Act of 2008, limited liability partnerships with a turnover of more than Rs. 40 lakh or a contribution of more than Rs. 25 lakh are required to have their books of accounts audited by licensed chartered accountants. An LLP's tax return must be filed by September 30th in order for his records to be audited.

Incorporation of LLP (Section 12)

1. Registering the LLP:

After the required documents are submitted, the Registrar (official in charge) will keep the incorporation documents. If everything is in place, the ROC will:
i) Register the LLP within 14 days.
ii) Issue a certificate confirming that the LLP has been officially set up with the name specified in the document.

2. Proof of Compliance:

The Registrar can accept a statement as proof that the requirements for setting up the LLP have been met.

3. Certificate of Incorporation:

The certificate that confirms the LLP is officially set up will be signed by the Registrar and stamped with their official seal.

4. Legal Proof:

This certificate is the official and final proof that the LLP exists with the name mentioned.

Registered Office and Changes (Section 13)

1. Registered Office:

Every LLP must have an official address, called the registered office, where all official documents and notices will be sent.

2. Serving Documents:

Official documents can be sent to the LLP by post (like regular mail or registered mail), or through other approved methods. They will be sent to the registered office or another address declared by the LLP.

3. Changing the Registered Office:

If the LLP wants to move its registered office to a new address, it must notify the Registrar. The change will only take effect once the notice is filed with the Registrar.

4. Penalties:

If the LLP fails to follow the rules about the registered office, it will be fined ₹500 per day, up to a total of ₹50,000.

Reservation of Name (Section 16)

1. Applying to Reserve a Name: If you want to use a specific name for your new LLP or if you want to change your existing LLP’s name, you can apply to the Registrar to reserve that name. The application needs to be done in a certain format and include a prescribed fee.
2. Name Reservation: If the Registrar agrees that your requested name meets the rules, they can reserve the name for your LLP for 3 months.

Changing or Rectifying the LLP Name (Section 17)

1. Name Conflicts:

If an LLP’s name is too similar to the name of another LLP, company, or a registered trademark, and it could cause confusion, the Central Government can order the LLP to change its name. This can happen if the name was registered by mistake or if it’s too similar to another entity's name. The LLP or the owner of the conflicting trademark or company can request the name change. Time Limit: The LLP has 3 months to change its name once the order is issued.If a trademark owner wants to request a name change, they must do so within 3 years from when the LLP was incorporated or registered under its current name.

2. Notifying the Registrar:

i) Once an LLP changes its name, it must inform the Registrar within 15 days and submit the government’s order to update its records.
ii) The Registrar will then issue a new certificate of incorporation with the updated name.
iii) The LLP must also update its name in the LLP agreement within 30 days of getting the new certificate.

3. Failure to Comply:

i) If the LLP does not change its name as ordered, the Central Government will assign a new name to the LLP and update the Registrar’s records.
ii) The LLP will be issued a fresh certificate with the new name.
iii) However, the LLP can change its name again later if needed.
iv) 100 per day subject to maximum 1,00,000 for LLP and 50,000 for its every partner.

STEPS TO INCORPORATE LLP

1.Request a DPIN (Designated Partner Identification Number).

All designated partners or those planning to be designated partners of the new LLP must have their DPINs applied for. The DPIN allocation application must be submitted on Form DIR-3. Documents (typically Aadhaar and PAN) must be scanned and attached to the form. A company secretary, chartered accountant, or cost accountant working full-time should also sign the form.

2.Name Approval

The proposed LLP's name is reserved through the Reserve Unique Name-Limited Liability Partnership (RUN-LLP), which will be handled by the Central Registration Centre. However, it is advised that you use the MCA portal's free name search feature before entering the name in the form. Based on the search parameters entered, the system will provide a list of names of current businesses and limited liability partnerships that are very similar. This will assist you in selecting names that are distinct from those that currently exist. Only if the name is not deemed undesirable by the Central Government and does not sound like a trademark, body corporate, LLP, or partnership company that already exists will the registrar allow it. It will be possible to correct the errors by resubmitting the form within 15 days. There is a clause allowing for two possible LLP names. After the MCA approves your name, you have three months to apply for LLP incorporation.

3.LLP incorporation

i) FiLLiP (Form for incorporation of Limited Liability Partnership) is the form used for incorporation, and it must be submitted to the Registrar having authority over the state where the LLP's registered office is located. An integrated form will be used.
ii) The fees listed in Annexure "A" must be paid.
iii) If a person who is to be appointed as a designated partner does not have a DPIN or DIN, this form also allows them to apply for DPIN allocation.
iv) Only two people will be permitted to submit an application for allocation.
v) It is also possible to apply for a name reservation via FiLLiP.
vi) The approved and reserved name will be used as the proposed name of the LLP if the applied name is accepted.
vii)The Limited Liability Partnership (LLP) agreement regulates the rights and responsibilities that are shared by the partners as well as between the LLP and its partners.
viii)The LLP agreement needs to be submitted online using Form 3 on the MCA Portal.
ix)The LLP agreement's Form 3 must be submitted within 30 days of the formation date.
x) It is required that the LLP Agreement be printed on stamp paper. Each state has a different stamp paper value.

  • FAQ
1. What is an LLP?

The advantages of a company and a partnership are combined in an LLP (Limited Liability Partnership), a hybrid business form. It gives its partners limited liability protection and the flexibility of a partnership.

i) Limited Liability: The amount of a partner's liability is capped at what they contributed to the LLP.
ii) Independent Legal Entity: LLP is regarded as an independent legal entity that exists independently of its partners.
iii)Absence of a Minimum Capital Need: To establish an LLP, there is no minimum capital needed.
iv) Perpetual Succession: LLP continues to exist regardless of partner changes.

Step 1: Acquire a certificate of digital signature (DSC). A DSC is required for each designated partner to sign electronic documents.
Step 2: is to acquire the Director Identification Number (DIN).A DIN application must be submitted by each designated partner via the Ministry of Corporate Affairs (MCA) website.
Step 3: Reservation of Names, Apply for the LLP's reservation using Form RUN-LLP after deciding on a name for it.
Step 4: The LLP Agreement is filed: Create a limited liability partnership agreement that outlines each partner's responsibilities and rights, then submit it to the Registrar of Companies (RoC).
Step 5: Documentation for Incorporation: Together with the required paperwork for registration, submit the incorporation forms (Form FiLLiP) to the MCA portal.
Issue of the Certificate of Incorporation shall follow approval.

i) PAN, Aadhaar, passport, voter ID, and other documents attesting to the partners' identities and addresses.
ii) Utility bills, rental agreements, and other documents attesting to the LLP's registered office address.
iii) LLP Agreement: Outlines partners' responsibilities and rights.

A minimum of two partners, either individuals or corporations, are needed for an LLP. The maximum number of partners is unlimited.

i) Annual Return Submission: Within 60 days of the fiscal year's conclusion, limited liability partnerships (LLPs) must submit an annual return in Form 11 to the Registrar of Companies (RoC).
ii) Statement of Accounts & Solvency Filing: LLPs have 30 days from the end of the fiscal year's first half to submit Form 8.
iii) Maintain Books of Accounts: The LLP is required to keep accurate books of accounts, which include balance sheets and income statements.
iv) LLPs are required to file an annual income tax return (ITR-5) and make tax payments in accordance with the applicable income tax regulations.
v) Changes to the Partnership: The RoC must be informed of any modifications to the partners or designated partners.

A legal agreement known as the LLP Agreement outlines the partners' obligations, rights, and functions. It regulates the LLP's activities, profit-sharing, and dispute settlement. Within 30 days following incorporation, it needs to be submitted to the Registrar.

The LLP Act of 2008 does not impose a minimum capital requirement on an LLP. Partners may make contributions in accordance with their mutual understanding.

Yes, by following the procedures outlined in the Companies Act of 2013, an LLP can be changed into a private limited company. Members' consent is needed for this, as is submission of the necessary paperwork to the RoC.

Failure to file yearly returns or other documents may result in the following penalties for noncompliance with the LLP Act's filing obligations.
i) Delays in filing are subject to late fees.
ii) Prosecution for severe non-compliance, which in certain circumstances may result in fines or even incarceration.

In an LLP, each partner's liability is capped to the amount of money they have contributed to the business. Unlike in a traditional partnership, they are not held personally responsible for the LLP's debts.

An LLP may be subject to fines and, in certain situations, have its name removed from the register by the RoC if it does not fulfil its compliance requirements. In this situation, the LLP might be dissolved, and if it isn't, the partners will be held individually responsible for any debts.