Many of you may not be aware of the regulatory compliances or turnover limits for LLPs, but that’s okay. We are here to help you, guide you at every step, and keep you on track. In this blog post, we will discuss LLP annual compliance and the turnover limits for audits.
The only way to avoid heavy penalties is by managing your compliance processes effectively. Don’t let a lack of awareness harm your firm’s reputation. Seek guidance from our experts and fulfill the mandatory business requirements on time. JustStart is here to support you.
What is a Limited Liability Partnership?
A Limited Liability Partnership (LLP) in India is a business entity regulated under the Limited Liability Partnership Act, 2008, and LLP Rules, 2009. It offers flexibility and scalability to its partners while having a separate legal identity with perpetual existence. However, each partner is responsible for their actions.
Like any other business, LLPs must comply with certain regulations on an annual basis to avoid legal action.
What are the LLP Annual Compliance Requirements?
LLPs must file annual reports with the Ministry of Corporate Affairs (MCA) to ensure legal compliance. This process involves submitting various forms, records, and documents on time to avoid penalties. The key requirements are:
- Form-11 (Annual Return): This form must be filed within 60 days after the close of the financial year. It includes details of management, partners, and business activities.
- Form-8 (Statement of Account and Solvency): This form must be filed within 30 days after six months from the end of the financial year. It updates the financial position of the firm.
- Income Tax Return: This must be submitted to the Income Tax Department, representing the firm’s tax liability and income. Ensure proof of tax payment is attached with other necessary documents.
What is the Turnover Limit for LLP Audit?
LLPs in India are required to undergo an audit based on specific turnover limits as prescribed by the LLP Act, 2008. The audit turnover limits for 2024 in India are as follows:
- Less than ₹40 lakhs: LLPs with an annual turnover below ₹40 lakhs are not required to undergo an audit.
- Above ₹40 lakhs and up to ₹10 crores: LLPs with a turnover between ₹40 lakhs and ₹10 crores must have their accounts audited by a practicing Chartered Accountant, as per the LLP Act, 2008.
- Equal to ₹10 crores or more: LLPs with a turnover of ₹10 crores or more are required to conduct an audit under the LLP Act, 2008, and a tax audit under the Income Tax Act, 1961. However, if cash transactions exceed 5% of the total transactions, the tax audit limit is reduced to ₹1 crore.
What are the Consequences of Non-Compliance for LLPs?
If you are involved in business activities, maintaining transparency is essential. It becomes your responsibility to present accurate records and meet all legal requirements within the specified timelines.
Failure to comply can result in severe penalties, not just financially but also reputationally. Fines may be imposed by the Income Tax Department or the Registrar of Companies, and legal action could be taken against the Limited Liability Partnership and its partners.
Frequently Asked Questions:
Q. Do LLPs have to conduct regular audits?
A. Yes, but only if the turnover exceeds the prescribed limit. Regular audits help maintain transparency and good governance.
Q. What is the purpose of an audit in LLPs?
A. Audits ensure reliability and accuracy in financial reporting and assess the solvency of the firm.
Q. What documents are required for annual compliance?
A. The required documents include the firm’s notes to accounts, partners’ details, address proof, certificate of practice, and statements of assets and liabilities. These documents must be pre-verified by a Chartered Accountant (CA).
Conclusion
LLP Annual Compliance is critical for smooth business operations. Stay aware of all legal requirements, and consult a professional for timely audits and compliance. If you have any queries, feel free to contact us
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