Maintaining compliance is crucial for any business entity, and for Limited Liability Partnerships (LLPs), it is no different. Proper adherence to compliance ensures smooth operations, enhances credibility, and avoids hefty penalties. While LLPs enjoy relatively lighter compliance requirements compared to private limited companies, failing to meet these obligations can still result in penalties of up to ₹5 lakh.

In this blog, we’ll walk you through the key aspects of LLP annual compliance, deadlines, penalties, and the benefits of staying compliant.

Key Compliance Requirements for LLPs

As separate legal entities, LLPs must meet certain annual compliance obligations. The Designated Partners of the LLP are responsible for ensuring that these requirements are met. The essential compliance tasks include:

1. Maintenance of Proper Book of Accounts
2. Filing of Annual Return (Form 11)
3. Filing of Statement of Accounts (Form 8)
4. Income Tax Return (ITR-5)
5. Audit (if applicable)

Let’s explore each requirement in detail.

1. Maintenance of Proper Book of Accounts

Maintaining accurate and up-to-date financial records is the foundation of LLP compliance. These records must include details of financial transactions, profits, expenses, assets, and liabilities. Proper bookkeeping not only helps in compliance but also provides valuable insights into the financial health of the LLP.

2. Filing of Annual Return – LLP Form 11

LLPs must file an annual return with the Ministry of Corporate Affairs using Form 11. This return contains key details such as the number of Designated Partners, contributions received, and an overview of partner information.

• Deadline: Form 11 must be filed within 60 days of the financial year’s end, i.e., by May 30th each year.
• Penalty for Late Filing: A fine of ₹100 per day of delay will be levied until the return is filed.

Timely filing ensures that the LLP remains compliant and prevents unnecessary complications, such as restrictions on closure or winding up.

3. Filing of Statement of Accounts – LLP Form 8

The Statement of Accounts and Solvency is another critical compliance document filed annually using Form 8. This form details the LLP’s financial position, including its assets and liabilities.

• Due Date: Form 8 must be filed within 30 days of six months after the financial year ends, i.e., by October 30th.
• Certification: It must be digitally signed by two Designated Partners and certified by a Chartered Accountant, Company Secretary, or Cost Accountant.
• Penalty for Late Filing: Similar to Form 11, the penalty is ₹100 per day of delay.

Form 8 is divided into two sections:

• Part A: Solvency statement of the LLP.
• Part B: Detailed accounts, including income and expenditure.

4. Income Tax Return (ITR-5)

LLPs are required to file their income tax returns annually using Form ITR-5.

• Deadline:
  • For LLPs not requiring a audit: July 31st.
  • For LLPs requiring a audit: October 31st.

Filing ITR-5 ensures that the LLP declares its income, expenses, and tax liability to the Income Tax Department.

5. Audit (If Applicable)

LLPs with:

• Annual turnover exceeding ₹40 lakh, or
• Contributions exceeding ₹25 lakh,

must undergo a audit by a practicing Chartered Accountant.

• Deadline for Audit: September 30th.
• Increased Threshold: From Assessment Year 2021-22, the turnover limit for a audit is raised to ₹5 crore, provided cash transactions (receipts or payments) constitute less than 5% of the total.

Additionally, LLPs involved in international transactions or specified domestic transactions must file Form 3CEB by November 30th.

Compliance Calendar for LLPs

Benefits of LLP Annual Compliance

1. Enhanced Credibility
   Meeting compliance standards improves trustworthiness, aiding in loan approvals and attracting investors.
2. Financial Transparency
   Proper filings create a transparent financial record, which is beneficial for stakeholders and potential partners.
3. Active Status and Penalty Avoidance
   Timely compliance keeps the LLP active, avoiding penalties and additional fees.
4. Ease of Conversion and Closure
   Regular filings simplify conversion to other business structures or dissolution of the LLP.