Annual Compliance for LLP

In India, LLP or Limited Liability Partnership enjoys a separate status and an organization needs to maintain its active status by regularly filing with MCA (Ministry of Corporate Affairs). Annual Compliance filing is compulsory for any LLP, whether having a business or not. LLP Compliance in India requires filing 2 separate forms. One form is for Annual Return and another one is for Statement of Accounts & Solvency. The forms are filed for reporting the activities & financial data for each Financial Year in the future. The failure to fulfill all the requirements for LLP Compliance levies an additional fee of Rs. 100 each day of a delay till the actual filing date. Hence, apart from the mandate, the heavy penalty compels the Partners to fulfill the requirements. For LLP, the returns should be filed periodically to maintain compliance & avoid heavy penalties for non-compliance. An LLP has only a few compliances to be followed every year which is amazingly low as compared to the compliance requirements placed on the Private Limited Companies. Whilst non-compliance might only charge a Private Limited Company Rs. 1 lakh in terms of penalties and it might charge an LLP up to Rs. 5 lakhs.

LLP (Second Amendment) Rules, 2022

What are LLP (Second Amendment) Rules, 2022?

The LLP (Second Amendment) Rules, 2022 introduce several key changes in the registration and compliance processes for Limited Liability Partnerships (LLPs) in India. The major amendments are as follows:

Increased Number of Partners: LLPs can now have 5 partners instead of the previous requirement of 2 designated partners without needing a Director Identification Number (DIN) during incorporation.
Allotment of TAN & PAN: Limited Liability Partnerships will be allotted their Tax Deduction and Collection Account Number (TAN) and Permanent Account Number (PAN) along with the Certificate of Incorporation (CoI).
Web-Based Consent Form: Filing for the consent of partners will now be done via a web-based Form-9.
Signing of Statement of Account & Solvency: This statement can now be signed on behalf of the LLP by its interim resolution professional.
Online Forms: All LLP forms are now available in a web-based or online format.

Benefits of LLP Compliance in India

Adhering to compliance requirements provides numerous benefits to LLPs in India:

Easy Closure and Conversion: Regular compliance makes it easier to convert an LLP into another organization or close it if needed. Compliance records streamline the process.
Avoid Penalties: Regular filing of forms helps prevent hefty penalties and avoids being declared a defaulter, thus protecting the LLP and its partners.
High Credibility: Legal compliance is crucial for maintaining credibility. Compliance status is publicly accessible, which is important for loan approvals and other requirements.
Financial Worth Record: Annual filings provide a record of the LLP’s financial worth, which is useful for entering into major projects or contracts.
Greater Reputation: Compliance enhances the organization’s reputation and trustworthiness, as its status is visible on the MCA portal.

Mandatory Compliance for LLP in India

Post-registration, LLPs must adhere to several mandatory compliance requirements:

One-Time Mandatory Compliance for LLP:

LLP Form-3: Draft an LLP Agreement and file it with the Registrar of Companies (ROC) in LLP Form-3 within 30 days of incorporation.
Opening a Bank Account: Open a current bank account in the LLP’s name. All transactions should be conducted through this account.
PAN & TAN Number: Obtain PAN and TAN from the Income Tax Department. With the LLP (Second Amendment) Rules, 2022, these will now be allotted with the Certificate of Incorporation.
GST Registration: Obtain GST registration if the annual turnover exceeds Rs. 40 lakhs (Rs. 20 lakhs for service providers). GST registration is not mandatory immediately post-incorporation but should be obtained as needed.