Let’s be candid—compliance is probably not the word that would excite most entrepreneurs. However, if you own a Limited Liability Partnership (LLP) in India, you will need to acknowledge its importance every year. The best part? Compliance is not impossible to achieve. We will take you through some Annual compliance for LLPs in plain English: what it is, why it is important, and how you can achieve it without losing your hair.
A Quick Reminder: What is an LLP?
Before we get into compliance, here is a summary of what an LLP is. A Limited Liability Partnership (LLP) is a hybrid type of business that combines the flexibility of a partnership with the limited liability of a company. It is a popular choice among professionals, small businesses, and start-ups for several reasons: fewer regulations, shared work responsibilities and limited personal risk.
However, while LLPs will experience fewer compliance requirements than private limited companies, they will still experience some sort of compliance requirements.
Why Annual Compliance is Important for LLPs
So, what is annual compliance? You can think of compliance as a health check for your LLP every year. Compliance ensures your LLP is operating legally, protects you from penalties, and builds your credibility with banks.
What is it?
1. Form 11 summarizes your LLP’s fundamental aspects
Including several partners, the nature of business, contributions made, and any events in the year.
It may not seem important if your LLP hasn’t operated during the financial year, it does need to be filed as it is one of those things that are non-negotiable.
Late fee: ₹100 per day
2. Filing of Form 8 (Statement of Account & Solvency)
Due date: October 30th every year.
Essentially, Form 8 is all the financials for your LLP – balance sheet, profit and loss, and a declaration of solvency (whether or not your LLP can pay its debts). It must be signed by a minimum of 2 designated partners and be certified by a Chartered Accountant (CA).
Key things to note:
– You need to file Form 8, even if it’s a zero-turnover LLP.
– You require a digital signature to file online.
– Late fee: ₹100 per day.
3. Income Tax Return (ITR) Filing
Due Date:
July 31st for LLPs that don’t require an audit
October 31st for LLPs that require an audit
Does your LLP require an audit?
– Yes, if either your annual turnover is over ₹40 lakh, or your capital contribution is more than ₹25 lakh.
What Happens If You Are Late On These Filings?
A lot of LLP owners often overlook the most basic filing requirements at the end of each year…
What are the Consequences of Ignoring These Filings?
Many LLP business owners fall into the trap of thinking, “Well, our LLP hasn’t been active, so what’s the point?” Unfortunately, the Government of Canada doesn’t view your situation the same way.
Here’s what can happen if you ignore compliance:
– If you ignore compliance, you might rack up fees that can accumulate over thousands or even lakhs of dollars.
– If you forget to comply, you will not be able to close or wind up your LLP until all dues are cleared.
– If you aren’t compliant, you will be disqualified as designated partners, making it nearly impossible to start another company or LLP.
Most Common “Offers” by LLPs (and How to Avoid Them)
Thinking that “no activity = no compliance”? Don’t forget that each LLP, even if it is dormant, is also required to file annual returns.
Don’t wait until the last minute: Sometimes forms require CA certifications and require DSC, so don’t leave it until the last minute!
Forgetting to renew DSCs: A Designated Partner’s digital signature certificate (DSC) has to be obtained for online filings and it also expires every 1-2 years.
Not updating changes: If you have a change in partners or if you have a change in capital you shall make changes promptly with Form 3.
Is Doing It Yourself Better Than Hiring Someone?
If you are comfortable with government portals/systems, MCA filings, and tax forms, then you might be able to do things alone. But for most LLPs, especially those with partners and transactions, professional help is the most productive choice.
Kanakkupillai has a fully compliant LLP. Kanakkupillai can manage the compliance for your LLP end-to-end, including but not limited to:
Tracking due dates
Preparing and filing required forms
Filing with zero penalties
Providing financial statements and audit support
Take the stress out of managing compliance so you can focus on growing your business.
Final Remarks
Operating an LLP provides the flexibility and limited liability that today’s business considers two of the most two things that modern businesses need. Flexibility does not exempt you from responsibilities. Sure, annual compliance does not sound exciting, but it provides legitimacy, protection, and helps in future growth for your LLP as a going concern.
You will be filing or managing the filings on behalf of your LLP. Knowing how and when to manage the all-important deadlines will save you from needless expenses and complications. So, dust off your calendar right now and mark those dates, and you will make a habit of managing your Annual compliance for LLP, for your future self and your business partners, they will all thank you!
Do you need a hand managing compliance requirements for your LLP?
Let Kanakkupillai manage your filings, paperwork, and deadlines so you can focus on what matters most, your business.