What to do post LLP Formation

A Limited Liability Partnership or LLP is a partnership arrangement between two or more than two partners. The LLP is registered under The Limited Liability Partnership Act, 2008. LLP operates as a body corporate which is governed by Limited Liability Partnership Act, 2008 (“Act”) and LLP Rules 2009 (“Rules”). LLP holds the benefit of limited liability. The personal assets of the partners of an LLP cannot be used to pay off the liabilities of the LLP.

While forming and LLP, an agreement is entered between the partners which lays down the various aspects of the functioning of the LLP. This can include areas in which LLP will work, rights of partners, responsibilities of the partners, etc.

All LLP’s are required to comply with certain rules and laws laid down in LLP Act and rules, and submit details and information with the Registrar on an annual basis. We have summarized these relevant laws below:

What Books of Account should be maintained by an LLP?

As per rule 24(2) of the Rules, the LLP is required to maintain the following documents for its business and file with the registrar annually:

• Profit and loss account
• Balance sheet
• Any other particulars which the partners may decide; Trial Balance, Reconciliation etc.

For how many years Limited Liability Partnership should preserve its Record?

As per rule 24(3) of the Rules, Limited liability partnership is required to keep books of account for 8 years from the date from the end of the respective Financial Year.

Is Audit of LLP mandatory?

One of the major advantages of an LLP as compared to a company is that it is not mandatory to get the accounts audited unless the turnover /capital contribution criteria are met. Every LLP has to maintain the annual accounts showing the true and fair view of the state of affairs of the LLP. As per rule 24(8) of the Rules, every LLP has to get its accounts audited by a Chartered Accountant in the following cases:-

1. Turnover Exceeds Rs. 40 Lakh in any financial year, or

1. Contribution exceeds Rs. 25 Lakh

How Auditors can be appointed in LLP?

The designated partners may appoint an auditor or auditors—

1. at any time for the first financial year but before the end of the first financial year,
2. at least 30 days prior to the end of the each financial year (other than the first financial year),
3. to fill a casual vacancy in the office of auditor, including in the case when the turnover or contribution of a limited liability partnership exceeds the limits specified under sub-rule .

An auditor shall hold office as per term of their appointment to hold the office till:

• The new auditor is appointed
• They are reappointed

What E forms are required to be Filed by LLP on Annual basis?

There are two E forms which are required to be filed by any LLP on an annual basis.

1. Statement of Account and Solvency in LLP Form 8
2. Annual Return in LLP Form 11

Below given is brief summary of provisions related to both forms:-

Form 8: Statement of Account and Solvency

Form 8 is also known as Statement of Account & Solvency. In Form 8, According to the rule 24(4) the LLP must provide details of financial transactions undertaken during the financial year and position at the end of financial year. In addition to the financial position, the LLP must also declare:-

• Declare that the turnover is above or below Rs. 40 lakhs.
• Form 8 must be digitally signed by a minimum of two Designated Partners of LLP

• Declare that the partners/authorized representatives have taken proper care and responsibility for maintenance of adequate accounting records and preparation of accounts.

Due date- within 30 days from the end of 6 months of end of the respective Financial Year i.e. on or before 30th October every year.

Form 11 LLP: Annual Return

• It contains details of all the designated partners and their contribution. Declaration about contribution/sums received by all the partners of the LLP. Basic information about Name, Address of LLP, details of Partners/ Designated Partners are needed to be declared.

• As per section 35 of the Act, Form 11 is an Annual return that is to be filled by all LLPs irrespective of turnover during the year. Even when an LLP does not carry out any operations or business during the financial year, Form 11 needs to be filed.
• As per rule 25(2) of LLP Rules, 2009, the annual return of an LLP having:-

Turnover up to Rs. 5 crore: during the corresponding financial year
Or
Contribution up to Rs. 50 Lakh shall be accompanied with a certificate from a designated partner.

In case total obligation of contribution of partners of the LLP exceeds Rs. 50 lakhs or turnover of LLP exceeds Rs. 5 crores, then LLP Form 11 needs to be certified by a Company Secretary in whole time practice.

Due date- within 60 days of closer of financial year (for f.y-2020-2021 due date is 30-5-2021)

What are the consequences of non filing?

• For LLP per day penalty of RS.100 till the filling is completed (for both forms separately)
• For designated partners-

From Rs.10,000 to Rs.1,00,000 penalty

• Roc via notice may strike off LLP and disqualify DPIN(DIN)