A Limited Liability Partnership or LLP is a legal entity that incorporates the goodness of a partnership firm and a corporation. In this type of partnership, the partners have limited liabilities.
An LLP is required to be registered under the Limited Liability Partnership Act, 2008.
Benefits of LLP Annual Compliance
The following benefits can be achieved by complying with the relevant regulatory requirements of the business:
- Reputation-: By complying with the requirements of the Registrar of Companies and the Ministry of Corporate Affairs, the LLP and partners will increase their reputation in the eyes of the public. Through this process an LLP can increase its compliance requirements. More investors would be willing to invest in an LLP that complies with the requirements of the law.
- Compliance-: By filing all compliances within a particular period of time, the LLP would be free from any form of compliance requirements. By considering this, an LLP can fulfil its objectives.
- Less Burdens-: By complying with the requirements of the authorities, the LLPs would face lesser burden when it comes to compliance requirements. If compliances are not followed up or filed by the LLP, it can be detrimental to the development of the LLP. Hence it is crucial that all the requirements related to compliance are followed by the partners of the LLP.
- Foreign Direct Investment-: The Government of India have recently brought out guidelines for FDI in LLPs. Foreign direct investment is a form of direct investment or indirect investment by a foreign company in the shares or capital structure of an Indian entity. By complying with the requirements of the authorities, foreign investors are more likely to invest in LLPs. Investment through FDI in an LLP can occur through the automatic route and the approval route. Through such investment the LLP can increase the amount of capital. Hence it is suitable for LLPs to consider all the requirements related to annual compliance.
For MCA Filings:
As per the Limited Liability Partnership Act, 2008 filing of Form 8 and Form 11 is a mandatory requirement for every registered LLP. Non-compliance with the LLP annual compliance leads to a penalty. The penalty amount is. 100 per day for every form not filed. No upper ceiling is specified for such penalty amount.
After Incorporation Compliances
Apart from the LLP annual compliance, there are certain one-time compliances. Once an LLP has been registered it is required to comply with certain requirements, as follows:-
- It is compulsory for the LLP to execute and file the LLP Agreement as per Section 2(O) & (q), 22 and 23 of the LLP Act, 2008 within 30 days of the formation with the Ministry of Corporate Affairs. The Agreement typically mentions the rights and duties of the partners and the LLP.
- As per the LLP Act, in case an Agreement is not filed, the mutual rights and liabilities shall be as per Schedule I to the Act. Hence if an LLP wishes to exclude provisions or requirements of Schedule I to the Act, it needs to have an LLP Agreement executed and filed specifically excluding the applicability of any or all provisions of Schedule I.
Penalty: Failure to file the Agreement within the stipulated period is liable to be fined at the rate of Rs. 100 per day of default with no upper limit to it.
- Other than the above, the LLP is required to apply for the LLP PAN and TAN
- Open LLP Bank Account
- Purchase the LLP seal and have LLP stationery prepared post incorporation.
Qus:- Can an existing partnership firm be converted to LLP?
Yes, an existing partnership firm can be converted into LLP by complying with the Provisions of clause 58 and Schedule II of the LLP Act.
ROC – Filings: Form 17 needs to be filed along with Form 2 for such conversion and incorporation of LLP.
Qus:- Can an existing company be converted to LLP?
Yes, any existing private company or existing unlisted public company can be converted into LLP by complying with the Provisions of clause 58 and Schedule III and IV of the LLP Act.
ROC- Filings: Form 18 needs to be filed with the registrar along with Form 2 for such conversion.
Qus:- Can an existing company be converted to LLP?
No, only private / unlisted public company can be converted into LLP.
Qus:- Is audit requirements related to an LLP mandatory?
When an LLP is formed or established, it is mandatory for an LLP to recruit a certified chartered accountant. Apart from this all forms related to the audit must be submitted as required.
Qus:- Are there any documents available for public inspection in the registrar’s office?
Yes all the documents related to incorporation must be available for inspection in the registrar’s office. The following documents must be present in the registrar:
- LLP incorporation documents
- LLP Agreement
- Annual Returns of the Partnership
- Audited Accounts
Qus:- Should the partnership submit any form of annual return?
Yes the LLP is required to submit the annual return. Such annual return must be submitted through e-form 11. Such requirements have to be carried out by the LLP within a period of 60 days to the ROC.