Limited Liability Partnerships (LLPs) in India are a popular business structure due to their combination of a company's limited liability with a partnership's flexibility. While they offer simpler compliance compared to private limited companies, LLPs still have mandatory annual and event-based compliance requirements under the Limited Liability Partnership Act, 2008, and the Income Tax Act, 1961.

Failing to adhere to these compliances can lead to significant penalties, disqualification of designated partners, and adverse effects on the LLP's legal standing and credibility.

Here's a breakdown of the key LLP compliance processes:

I. Mandatory Annual Compliances for LLPs

These are the most critical compliances that every LLP must fulfill each financial year, irrespective of its turnover or whether it conducted any business activities. The financial year for LLPs in India is from April 1st to March 31st.

1. Filing of Statement of Account & Solvency (Form 8)

• Purpose: This form provides a detailed financial summary of the LLP, including its assets, liabilities, and a declaration of its solvency. It's akin to a balance sheet and profit & loss statement.

• Due Date: October 30th of every financial year. (i.e., for FY 2024-25, the due date is October 30, 2025).

• Signing & Certification:

  • Digitally signed by a minimum of two Designated Partners.

  • If the LLP's turnover exceeds INR 40 lakhs or the partner's contribution exceeds INR 25 lakhs, Form 8 must also be certified by a practicing Chartered Accountant or Cost Accountant.

• Key Information: Includes details of contingent liabilities, secured/unsecured loans, and capital contributions.

• Penalty for Late Filing: INR 100 per day of delay, with no upper limit.

2. Filing of Annual Return (Form 11)

• Purpose: This form is a summary of the LLP's affairs, including partner details (additions/cessations), changes in management, and total contributions. It's a snapshot of the LLP's structure.

• Due Date: May 30th of every financial year. (i.e., for FY 2024-25, the due date is May 30, 2025).

• Signing & Certification:

  • Digitally signed by two Designated Partners.

  • If the total obligation of contribution of partners exceeds INR 50 lakhs or the turnover of the LLP exceeds INR 5 crores, the form must be certified by a practicing Company Secretary.

• Key Information: Details of partners/designated partners, their contributions, and any penalties imposed or compounding offenses committed during the year.

• Penalty for Late Filing: INR 100 per day of delay, with no upper limit.

3. Income Tax Return (ITR-5)

• Purpose: All LLPs, irrespective of their income, profit, or loss, must file an Income Tax Return with the Income Tax Department. LLPs are taxed as a partnership firm.

• Form: ITR-5

• Due Dates:

  • July 31st of the assessment year: For LLPs whose accounts are not required to be audited under the Income Tax Act.

  • October 31st of the assessment year: For LLPs whose accounts are required to be audited.

  • November 30th of the assessment year: For LLPs involved in international transactions or specified domestic transactions that require filing Form 3CEB (Transfer Pricing Report).

• Audit Requirements:

  • An LLP's accounts must be audited by a Chartered Accountant if its annual turnover exceeds INR 40 lakhs or its capital contribution exceeds INR 25 lakhs in any financial year.

• Penalty for Late Filing: A penalty of INR 5,000 may be levied under Section 234F of the Income Tax Act for delays beyond the due date.

II. Other Important Compliances (Annual/Event-Based)

1. Maintenance of Books of Accounts

• LLPs are required to maintain proper books of accounts on a cash or accrual basis, following the double-entry system of accounting. These records should reflect the LLP's financial transactions, profits, expenses, assets, and liabilities. They must be kept at the LLP's registered office.

2. DIR-3 KYC for Designated Partners

• All individuals holding a Director Identification Number (DIN)/Designated Partner Identification Number (DPIN) must file Form DIR-3 KYC annually to update their KYC details with the Ministry of Corporate Affairs (MCA).

• Due Date: September 30th of every financial year.

• Penalty for Non-KYC: Deactivation of the DIN/DPIN and a penalty of INR 5,000 for reactivation.

3. Filing of LLP Agreement (Form 3) - One-Time & Event-Based

• One-Time: The LLP Agreement must be filed in Form 3 with the Registrar of Companies (ROC) within 30 days of the LLP's incorporation. This is a crucial document defining the mutual rights and duties of partners and the LLP.

• Event-Based: Any changes to the LLP Agreement (e.g., changes in profit-sharing ratio, admission/resignation of partners, change in partner details) also require filing Form 3 within 30 days of the change.

• Penalty for Late Filing: INR 100 per day of delay, with no upper limit.

4. Event-Based Filings (as and when applicable)

• Change in Designated Partner/Partner: Filing of Form 4 (Notice of appointment, cessation, and change in designation of a designated partner or partner) within 30 days of the event.

• Change in Registered Office: Filing of Form 15 (Notice for change of place of registered office) within 30 days of the change.

• Conversion of LLP: If an LLP converts into a company or vice-versa, specific forms are required.

• Strike Off/Closure of LLP: Specific forms and procedures are required for closing down an LLP.

• GST Compliance: If the LLP's turnover exceeds the GST threshold (or if it opts for voluntary registration), it must comply with all applicable GST provisions, including:

  • Filing of GSTR-1 (outward supplies)

  • Filing of GSTR-3B (summary return and payment)

  • Any other specific GST returns or compliances as required (e.g., e-invoicing, e-way bills if applicable).

• TDS/TCS Compliance: If the LLP is liable to deduct or collect tax at source, it must comply with TDS/TCS provisions, including timely deduction, payment, and filing of returns.

III. General Process for Filing LLP Forms with MCA

Most LLP forms are filed electronically through the MCA (Ministry of Corporate Affairs) portal.

1. Preparation of Documents: Gather all necessary financial statements, partner details, and supporting documents.

2. Downloading e-Forms: Download the relevant e-Form (e.g., Form 8, Form 11) from the MCA website.

3. Filling the Form: Fill out the e-Form offline. Use the 'Prefill' option (if available) to populate certain fields.

4. Attaching Documents: Attach all required supporting documents as PDFs.

5. Digital Signature: Ensure the form is digitally signed by the Designated Partner(s) using their Digital Signature Certificate (DSC). For certain forms, a professional (CA/CS/CMA) also needs to certify and digitally sign.

6. Pre-Scrutiny: Use the 'Check Form' or 'Pre-scrutiny' button to validate the form and attachments for any errors.

7. Upload: Upload the validated e-Form to the MCA portal.

8. Fee Payment: The system will calculate the applicable filing fees and any late fees. Make the payment online.

9. Acknowledgement: Upon successful submission and payment, an acknowledgment is generated.

Benefits of Timely LLP Compliance

• Avoidance of Heavy Penalties: The per-day penalty for late filing of Form 8 and Form 11 can accumulate significantly.

• Maintaining Legal Status: Ensures the LLP remains 'Active' on MCA records. Non-compliance can lead to the LLP being declared 'Defaulter' or even 'Struck Off'.

• Enhanced Credibility: Timely filings build trust with banks, financial institutions, investors, and potential business partners.

• Smooth Business Operations: Ensures proper access to banking, loans, and other services.

• Ease of Future Processes: Simplifies processes like conversion to a company, raising funds, or closing down the LLP.