Upon incorporation, every LLP is required to adhere to the ROC’s time-bound compliances. These compliances and procedural concerns guarantee that the LLP runs smoothly. In general, as compared to other company forms, LLP faces less compliance. LLPs are required to comply with post-incorporation compliances; consequently, any failure to do so will result in a penalty for the firm owners.
LLP Partnership is the best type of business registration since it requires fewer compliances than other types of company registrations. Although we must take care of Compliances on time, or else the Penalty metre will begin to grow.
With the successful formation of your valued company, it is time to proceed with the Post Incorporation stages for your business, which will assist your firm in remaining compliant with the Ministry of Corporate Affairs’ standards.
This article seeks to outline the required Post-Incorporation Compliances for LLP.
List of Mandatory post incorporation compliances for LLP
LLP is a corporate business form that combines the benefits of a company’s limited liability with the flexibility of a partnership firm. Because of the restricted responsibility in the event of insolvency, the LLP is a separate legal entity that does not jeopardise the partner’s personal assets. The rights to incorporate such a business type in India are held by ROCs of the different jurisdictions. These entities must comply with the following post-incorporation compliances for LLP as soon as they are formed.
1. LLP AGREEMENT
The Partners of an LLP are required to agree on an LLP Agreement immediately upon the establishment of the LLP, and a copy must be submitted with the Registrar of Companies in LLP Form 3 within 30 days of incorporation.
An LLP agreement is a contract between the active partners that outlines the rights and duties of the serving partners. Within thirty days of establishment, an LLP is required to file an agreement. If the firm fails to comply with this provision, it will be fined Rs 100 each day.
2. APPLICATION FOR PERMANENT ACCOUNT NUMBER (PAN)
Every LLP Company is required by the Income Tax Department of the Government of India to get a Permanent Account Number (PAN).
3. APPLICATION FOR TAX DEDUCTION AND COLLECTION ACCOUNT NUMBER (TAN)
Every limited liability partnership (LLP) must acquire a Tax Deduction and Collection Account Number (TAN) from the Income Tax Department of the Government of India.
4. OPENING BANK ACCOUNT IN LLP NAME
A current account in the name of the LLP must be opened with any Bank of India.
In India, registered entities are required to open a current bank account with the authorised bank. The same is true for LLP-based entities.
Almost all banks now provide a website that allows businesses to create current bank accounts electronically. These portals will request the partner to supply the following papers when filling out the online application.
- LLP Contract
- Resolution of the Board
- Pan of the Company
- Proof of the partners’ addresses and identities
- The ROC granted a certificate of incorporation.
Following that, the bank will complete the remaining requirements offline.
5. MSME/SSI REGISTRATION
MSME registration is the process of getting your LLP registration under the MSME Development Act in order to receive SME advantages.
5. BOOKS AND ACCOUNTS OF LLP
The LLP is required to create and maintain Books of Accounts for all receipts and payments, as well as to meet with legal obligations under the Companies Act and other related legislation.
6. SHOP AND ESTABLISHMENT REGISTRATION
Every Business Establishment is required to get Shop and Establishment Registration within 30 days after registration under the relevant State Shop and Establishment Act and Rules.
7. PROFESSIONAL TAX REGISTRATION – EMPLOYER & EMPLOYEE
Every business must acquire Professional Tax – Employer Registration (Enrolment Certificate within 30 days of incorporation).
8. INFUSION OF INITIAL CAPITAL BY SUBSCRIBERS TO MEMORANDUM
Members to the Memorandum of Company must provide the amount of subscribed capital indicated in the Memorandum of Association to the company registration within 60 days of establishment.
9. APPOINTMENT OF AUDITORS
Every LLP with a capital commitment of more than Rs.25 lakhs or annual revenue of more than Rs.40 lakhs must have its accounts audited by a Chartered Accountant in Practice.
According to the current bylaws, every LLP is required to have its accounts audited by a practising CA if they meet the following conditions.
- The company’s annual turnover exceeds Rs 40 lakhs.
- Alternatively, the donation exceeds the Rs 25 lakhs barrier limit.
To qualify for the audit exemption, the LLP’s accounts must include a declaration from the partners demonstrating their commitment to satisfying accounting and financial statement responsibilities.
10. GST REGISTRATION
Under the Goods and Services Tax (GST) Act and Rules, every firm with an annual turnover of more than Rs.40 lakhs (service providers 20 lakhs) is obliged to register for GST.
GST is a type of integrated tax system that attempts to incorporate different indirect taxes such as CGT, VAT, import-export duty, octroi, luxury tax, and entertainment tax. GST registration is a legal requirement for registered companies in India that fulfil the following basic GST Act conditions.
- If the company’s current supply of products and services exceeds Rs 20 lakh.
- For North-Eastern states, the ceiling is Rs 10 lakh.
- If the company is involved in the interstate provision of products and services.
- Businesses that operate in an e-commerce environment.
- Taxpayers acting as distributors of input services (ISD)
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Depositing share contribution fund to the designated bank
This is possibly the most important post-incorporation compliance for an LLP. Every partner is required to deposit their contribution into the relevant bank account within the time limit specified based on their own capacity. A partner with an ownership capacity of Rs 20,000 or more may send cash to the firm from their personal account via an online transfer or a check.
In addition to the aforementioned alternatives, partners with an ownership capacity of less than Rs 20,000 can make the payment in cash.
Income tax returns
IT returns are statements that indicate existing income sources, tax liabilities, details of taxes paid, and any refunds due to the government.
Even if the LLP does not earn any revenue in the given calendar year, the serving partner is required by law to file an IT return. IT returns are submitted on an annual basis. Failure to comply with such a requirement would obligate the tax authorities to levy fines on the violators.
Annual Return Filing
Details about the LLP’s financial performance, management, and governance should be shared with the ROC in the appropriate jurisdiction. LLPs are required to file annual returns within sixty days of the fiscal year’s end and account statements and solvency by thirty days of the fiscal year’s end.
The fiscal year for LLPs runs from April 1 to March 1. The annual return for the LLP is due on May 30th. The statement of account and solvency is due on October 30th of each fiscal year. Delays in submitting may result in a Rs 100/day penalty for the firm. The defaulting serving partners would face a punishment of Rs 10000-Rs 100000.
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As seen above, LLPs face lesser compliance than other company types such as private limited corporations and public limited companies. The majority of the above-mentioned post-compliances are time-bound and include substantial fines. As a result, it is critical to keep a close eye on the deadlines for such compliances.