LLP or the Limited Partnership is a hybrid combination of a limited and partnership company.
Minimum two partners are required to incorporate an LLP there is no such upper limit.
Limited Liability Partnerships are required to file the annual returns within 60 days from the end of the close of the financial year and account statement and solvency within 30 days from the end of six months of the closure of the financial year.
The financial year for the LLPs starts from the 1st of April to the 31st of March. The annual return for the LLPs is due on May 30th while the statement of accounts and solvency is due on the 30th of October of each financial year.
Besides the MCA annual return filing, the limited liability partnerships must also mandatorily file the income tax return every year.
Separate Legal Entity: LLP is a body corporate and separate legal entity from its partners having perpetual succession. It can own assets in its name, sue and be sued.
No liability for negligence of other partner: The main advantage of LLP is that no partner can be held liable for negligence or misconduct of other partners.
Limited Liability: Partner’s liability is limited to the extent of agreed contribution (capital) in the LLP Agreement except in case of fraud.
Perpetual Succession: Unlike a general partnership firm, a limited liability partnership can continue its existence even after the retirement, insanity, insolvency or even death of one or more partners.
Business for Profit Only: Limited Liability Partnerships cannot be formed for charitable or non-profit purposes. It is essential that the entity is formed to carry on a lawful business with a view to earning a profit.
Lower Compliance Requirement: An LLP involves lesser compliance as compared to a private/ public limited company. Unlike companies, compliances elated to board meetings, statutory meetings etc. do not apply to LLPs
Audit of accounts from professionals: LLP shall maintain proper books of accounts where audit shall also be required if the capital contribution exceeds Rs. 25 Lakhs or turnover exceeds Rs. 40 Lakhs
No requirement of compulsory Audit: All companies, whether private or public, irrespective of their share capital, are required to get their accounts audited. But in case of LLP, there is no such mandatory requirement. This is perceived to be a significant compliance benefit. A Limited Liability Partnership is required to get the tax audit done only in the case that: -
Lower registration cost: When compared to the expense of forming a private limited or public limited company, the cost of forming an LLP is lower. However, the price gap between forming an LLP and forming a private limited company has narrowed in recent days.
No requirement of minimum contribution: There is no minimum capital requirement in LLP. An LLP can be formed with the least possible capital. Moreover, the contribution of a partner can consist of tangible, movable or immovable or intangible property or other benefits to the LLP.
Taxation Aspect on LLP: For income tax purpose, LLP is treated on a par with partnership firms. Thus, LLP is liable for payment of income tax and share of its partners in LLP is not liable to tax. Thus no dividend distribution tax is payable. Provision of ?deemed dividend? under income tax law, is not applicable to LLP. Section 40(b): Interest to partners, any payment of salary, bonus, commission or remuneration allowed as deduction.
The income tax rate applicable for LLPs registered in India is 30% of the total income. Besides the income tax, a surcharge is levied on the income of the tax payable at the rate of 12% when the total income is exceeding Rs.1 crore
Health & Education Cess:
Health and Education cess of 4% is applicable on the amount of income tax and the applicable surcharge.
Minimum Alternate Tax (MAT) for LLP:
Similar to income tax applicable for a company, LLP is also subject to minimum alternate tax. A minimum alternate tax of 18.5% of adjusted total income is applicable for LLP. Hence, income tax payable by LLP cannot be less than 18.5 percent (increased by income tax surcharge, education cess, and secondary and higher education cess).
All the Limited Liability Partnership are required to maintain proper account banks on a cash basis or accrual basis. As Private Limited Companies are required to maintain books of accounts only on an accrual basis.
The LLPs have the option of maintaining the books of accounts on a cash basis as well. The books of accounts must be maintained at the registered office of the LLP and must contain all the information like:
The LLPs are required to elect the partners for maintaining proper books of accounts and filing the annual return with the Ministry of Corporate Affairs annually.
Limited Liability Partnerships are required to file their Statement of Account & Solvency within a period of thirty (30) days from the end of six (6) months of the financial year and Annual Return within sixty (60) days from the end of the financial year.
Annual Returns are to be filed in the prescribed Form-11. This form is considered as the summary of management affairs of LLP, like numbers of partners along with their names. Moreover, the form 11 has to be filed by 30th May every year.
The due date has been extended to 10th of January, 2021 from December 31st, 2020 and if tax audit is required for the LLP then the due date for IT returns for LLP has been extended till 15th February,2021 from 31st January, 2021.
Even if the LLP has not done any business for the current financial year, the LLP is required to file a Nil Income Tax returns with the tax authorities.
LLP Form 8 is an annual filing is to be filed with ROC every year. Statement of account and solvency shall be filed with the registrar within 30 days from the end of 6 months of the financial year to which the statement relates. The due date for LLP annual filing is 30th October 2020.
This form includes a declaration on the solvency state of the LLP by the designated partners and also information related to the statement of assets and the liabilities and statement of income and the expenditure of the LLPs.
If an LLP is incorporated after the 1st of October of the current year that is say 1 October 2020, then the LLP can file returns in the coming March that is 31 March 2021 or next March that is 31 March 2022 that is an LLP can file its first financial return for a period of 18 months.
If Form 11 is not filed by the LLP by the 31st of May, then Rs 100 will be levied as a penalty per day for delay. The amount can also increase over time as there is no cap on the penalty.
Form 8 must be duly filled by the 30th of October. Failure to file can incur a penalty of Rs.100 per day of delay.
If the turnover does not exceed Rs 5 crores and the total partner contribution does not exceed Rs 50 lakh then digital signatures of the designated partner will suffice. However, if the turnover exceeds Rs.5 crores and the total partner contribution exceeds Rs 50 lakh, then Form 11 needs to be certified by a Company Secretary in full-time practice.
Form 8 is a form and hence must be digitally signed by a minimum of two Designated Partners of LLP or Authorized Representatives of Foreign LLP if the total turnover of the LLP is less than or equal to Rs 40 lakh or partner’s obligation of contribution is less than or equal to Rs 25 lakh.
In case the total turnover of the LLP exceeds Rs 40 lakh or partner’s obligation of contribution exceeds Rs. 25 lakh, then Form 8 must be certified by the auditor of the LLP.
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