Annual Compliance under LLP Act, 2008- Complete Guide
A Limited Liability Partnership (LLP) is an in-demand form of business entity in India that amalgamates the advantages of both a partnership firm and a company. It provides the flexibility of a partnership with the benefits of limited liability like a company. LLPs are guided or governed by the Limited Liability Partnership Act, 2008.
To keep an LLP active and in good standing with the government, it must comply with certain annual compliance requirements. These compliances ensure transparency, legal standing, and protection of the LLP's status.
This blog will explain what annual compliance under the LLP Act, 2008 means, its importance, deadlines, and penalties for non-compliance, all in simple language.
What is Annual Compliance for LLPs?
Every LLP registered in India, regardless of its size, turnover, or business activity, must file certain forms, structure and returns with the Ministry of Corporate Affairs (MCA) annually.
These filings help the government keep track of the financial health, structure, and activities of LLPs.
Key annual compliance requirements include:
- Form 8: Statement of Account and Solvency
- Form 11: Annual Return of LLP
- Income Tax Return (ITR)
Importance of Annual Compliance
Here's why annual compliance is crucial for LLPs:
- Legal Obligation: Compliance is very mandatory process under the LLP Act, 2008. Non-compliance can lead to unwanted legal penalties and even the striking off of the LLP.
- Maintains Active Status: Regular filing helps to maintain the status of LLP activeness, integrity and in good standing with the MCA.
- Financial Transparency: Compliance ensures financial records are updated and available to stakeholders and regulatory authorities.
- Avoids Penalties: Timely filing of returns and forms helps avoid heavy penalties and legal action.
Annual Compliance Requirements for LLPs
Let's look at the key filings required by an LLP every year.
A. Form 8: Statement of Account and Solvency
What is it?
Form 8 contains the financial statement of the LLP, including details of assets, liabilities, income, and expenditure. It also contains a declaration of the LLP's solvency.
Who files it?
It must be signed by two designated partners and should be certified by a Chartered Accountant, Company Secretary, or Cost Accountant.
Due date:
- Within 30 days from the end of 6 months of the financial year.
- For example, for the financial year which is ending on 31st March, the due date is 30th October.
Penalty for late filing:
- ₹100 per day of delay.
- No maximum limit, which means the penalty keeps increasing until the filing is done.
B. Form 11: Annual Return
What is it?
Form 11 is the annual return of the LLP containing details about the number of partners, their names, addresses, and other basic information about the LLP.
Who files it?
It must be filed by two designated partners and certified by a practicing professional (if turnover exceeds ₹5 crore or contribution exceeds ₹50 lakh).
Due date:
- Within 60 days from the end of the financial year.
- For the financial year that is ending on 31st March, the due date is 30th May.
Penalty for late filing:
- ₹100 per day of delay.
- Again, no maximum limit.
C. Income Tax Return (ITR) Filing
What is it?
Like any other business entity, an LLP is required to file an Income Tax Return (ITR) under the Income Tax Act, 1961.
Due date:
- If audit is not required: 31st July of the assessment year.
- If audit is required: 31st October of the assessment year.
When is audit required?
- If turnover exceeds ₹1 crore (for business) or ₹50 lakh (for professionals).
Penalty for late filing:
- ₹5,000 if filed after due date but before 31st December.
- ₹10,000 if filed after 31st December.
- If total income is below ₹5 lakh, the penalty is ₹1,000.
Other Important Compliance Points
Here are a few additional points every LLP should keep in mind:
- Maintaining Books of Accounts: LLPs must maintain proper books of accounts either on cash or accrual basis. These records should be preserved for at least 8 years.
- Audit Requirements: LLPs with turnover above ₹40 lakh or capital contribution above ₹25 lakh must get their accounts audited by a Chartered Accountant.
- DPIN and DSC: Designated partners must keep their DPIN (Designated Partner Identification Number) and DSC (Digital Signature Certificate) active for filing forms.
- Changes in LLP: Any changes in the LLP agreement, partners, or business address must be reported through appropriate forms to the MCA.
| Read More: MCA Launches Final 38 Web-Based Company Forms on V3 Portal |
Penalties for Non-Compliance
An act of non-compliance with annual filing requirements may result in:
- Late fees: ₹100 per day of delay (no upper limit) for Form 8 and Form 11.
- Legal Action: The Registrar may initiate legal action against the LLP and its partners.
- Disqualification: Designated partners may face disqualification.
- Striking off: Continuous non-compliance can lead to the LLP being struck off the register and effectively dissolving it.
Benefits of Timely Compliance
- Builds Credibility: Regular compliance boosts the reputation of the LLP among clients, investors and banks.
- Smooth Operations: An LLP with clear records and compliance can easily apply for loans, government tenders, or registrations.
- Avoids Hassles: Timely filing means no worries about late fees, penalties, or legal complications.
Simple Compliance Calendar for LLPs
| Compliance | Form | Due Date |
| Annual Return | Form 11 | 30th May |
| Statement of Account & Solvency | Form 8 | 30th October |
| Income Tax Return (without audit) | ITR | 31st July |
| Income Tax Return (with audit) | ITR | 31st October |
Conclusion
An LLP offers a great business structure for entrepreneurs who want limited liability and operational flexibility. However, maintaining this structure requires regular compliance under the LLP Act, 2008 and the Income Tax Act, 1961.
By ensuring timely filing of Form 8, Form 11, and ITR, LLPs can maintain their legal status, avoid penalties, and build a strong reputation. For expert assistance, you can reach out to us, CRSPL Business Consultants will assist you.
It is always a good idea to consult a professional such as a Company Secretary, Chartered Accountant, or legal advisor to stay on top of annual compliance and other legal requirements.
Frequently asked questions (FAQs)
Q1: Is annual compliance mandatory for all LLPs, even if there is no business activity?
A: Yes, annual compliance is mandatory for all LLPs, even if they have no business transactions or income during the year. Failing to comply can attract penalties.
Q2: What happens if an LLP does not file Form 8 or Form 11 on time?
A: The LLP and its partners are liable to pay a penalty of ₹100 per day of delay for each form, with no upper limit. Persistent non-compliance can result in legal action and even the striking off of the LLP.
Q3: Is it necessary for a newly registered LLP to comply with annual filings?
A: Yes, even a newly registered LLP must comply with annual filing requirements. For example, if an LLP is incorporated on or before 30th September, it must file the annual return and statement of accounts for that financial year. If incorporated after 30th September, it can file in the next financial year.
Q4: Does an LLP need to get its accounts audited every year?
A: Not always. An LLP is required to get its accounts audited only if its turnover exceeds ₹40 lakh or if the capital contribution exceeds ₹25 lakh in any financial year. Below this threshold, audit is not mandatory.
Q5: Can I file Form 8 and Form 11 online?
A: Yes, both Form 8 and Form 11 must be filed online through the official MCA portal (www.mca.gov.in) using valid DSCs (Digital Signature Certificates) of the designated partners. Payment of filing fees and late fees (if any) can also be done online.
