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LLP Compliance Post Incorporation
Post incorporation of a Limited Liability Partnership (LLP), certain compliance and procedural matters need to be completed to ensure the smooth functioning of the LLP. The overall compliance requirement for a LLP is less cumbersome, when compared to the post incorporation compliances required for a company. However, since LLP is also a separate artificial judicial person, care must be taken to ensure LLP compliances are being completed on time to avoid heavy penalty. In this article, we look at some of the major LLP Compliance performed post incorporation.
Filing LLP Agreement
The LLP Agreement governs the rights and duties of partners and the LLP. After incorporation of a LLP, LLP Agreement must be filed with the Ministry of Corporate Affairs within 30 days. LLP agreement is mandatory for all LLPs and even in the absence of a specific LLP Agreement, an LLP Agreement must be executed, specifically excluding applicability of any or all paragraphs of Schedule I (default LLP agreement).
Failure to file LLP Agreement within 30 days of incorporation of a LLP attracts a heavy penalty of Rs.100 per day of default with no ceiling on the maximum fine. Hence, care must be taken to ensure that the LLP agreement is properly executed and filed within the due-date.
LLP Seal: LLP seal would be required for opening bank account of the company and for applying for PAN. Hence, two rubber seals – round type with LLP name and LLP name with designation can be purchased on incorporation of a LLP>
Letterhead: LLP stationary like letterhead, invoice, official documents, etc., can be prepared with the LLP name and registered office of the LLP.
Book of Accounts: LLPs are required to maintain proper book of accounts on cash or accrual basis. Book of accounts for a LLP can be maintained manually with the register kept at the registered office or electronically through accounting softwares like Tally or Quickbooks.
LLP PAN Application
Post incorporation of a LLP, PAN card for the LLP can be applied for online. PAN application (Form 49A) is used for applying for PAN for LLP. Once, an application is submitted online, the PAN acknowledgement must be signed and sealed by a Designated Partner of the LLP. The signed application must then be couriered to the NSDL office for issue of PAN card. The PAN card of the LLP will be sent to the registered office address of the LLP in 10 – 20 working days.
LLP Bank Account Opening
Bank account for a LLP can be opened easily, as it is considered to be a corporate entity. The following documents of the LLP must be submitted for opening of LLP bank account:
- Copy of the LLP agreement
- Copy of the Incorporation document and DPIN of the designated partners
- Copy of the LLP Registration Certificate issued by the ROC
- Copy of LLP-IN issued by the ROC
- Copy of the Resolution to open a bank account
- List of authorized person/s with the specimen signatures to operate the account duly attested by Designated Partners
- Copy of PAN allotment letter
All documents must be signed by a Designated Partner and must have the seal of the LLP.
There is no concept of appointment of auditor in a LLP, as there is no requirement for audit of the book of accounts of a LLP unless turnover exceeds Rs.40 lakhs or capital contribution exceeds Rs.25 lakhs.
Filing LLP Annual Return
LLPs in India must file its Annual Return within 60 days from the end of close of financial year and Statement of Account & Solvency within 30 days from end of six months of close of financial year. Unlike Companies, LLPs mandatorily have to maintain their financial year, as April 1st to March 31st. Therefore, LLP annual return is due on May 30th and the Statement of Account & Solvency is due on October 30th of each financial year. Care must be taken again to ensure LLP Annual Return is filed on time, as non-compliance attracts a penalty of Rs.100 per day of default with no ceiling. Know more about filing LLP annual return.
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OPC Registration FAQ,s
How many people are required to start a Partnership firm?
A minimum of two Persons is required to start a Partnership firm. A maximum number of 20 Partners are allowed in a Partnership firm.
What are the requirements to be a Partner in a Partnership firm?
The Partner must be an Indian citizen and a Resident of India. Non-Resident Indians and Persons of Indian Origin can only invest in a Proprietorship with prior approval of the Government of India.
What are the documents required to start a Partnership firm?
PAN Card for the Partners along with identity and address proof is required. It is recommended to draft a Partnership deed and have it signed by all the Partners in the firm.
What is the capital required to start a Partnership firm?
There is no limit on the minimum capital for starting a Partnership firm. Therefore, a Partnership firm can be started with any amount of minimum capital.
Who will register a Partnership firm?
Partnership firms are registered by the Registrar of Firms, under the Indian Partnership Act, 1932.
What are the advantages of a Registered Partnership firm?
Only a registered Partnership firm can file a suit in any court against the firm or other partners for the enforcement of any right arising from a contract or right conferred by the Partnership Act. Also, only a Registered Partnership firm can claim a set off (i.e. mutual adjustment of debts owned by the disputant parties to one another) or other proceedings in a dispute with a third party. Hence, it is advisable for Partnership firms to get itself registered sooner or later.
How to open a bank account for a Partnership firm?
To open a bank account for a Partnership firm, a registered Partnership deed along with identity and address proof of the Partners need to be provided.
Will my Partnership firm have a separate legal identity?
No, a Partnership firm has no separate legal existence of its own i.e., the Partnership firm and the partners are one and the same in the eyes of law. Liability of the Partners is also unlimited, and the partners are said to be jointly and severally liable for the liabilities of the firm. This means that if the assets and property of the firm is insufficient to meet the debts of the firm, the creditors can recover their loans from the personal property of the individual partners.
Will my Partnership firm have a Certificate or Registration?
If the Partnership firm is registered, the Partnership deed will be registered and a Registration Certificate will be issued by the Registrar of Firms.
How to register the name of a Partnership firm?
Partnership firms are business entity that are owned, managed and controlled by one person. So Partners cannot be inducted into a Partnership firm.
How can I transfer my Partnership firm?
There are restrictions on the transfer of ownership interest in a Partnership firm. A Partner cannot transfer his/her interest in the firm to any person (except to the existing partners) without the unanimous consent of all other partners.
Can other people invest in a Partnership firm?
Indian Nationals and Indian Residents are allowed to invest in a Partnership firm without any approval. Usually those who invest in the Partnership firm become a Partner of the firm and in the absence of any agreement to the contrary, all partners will have a right to participate in the activities of the business.
What are the annual compliance requirements for a Partnership?
Partnership firm will have to file their annual tax return with the Income Tax Department. Other tax filings like service tax filing or VAT/CST filing may be necessary from time to time, based on the business activity performed. However, annual report or accounts need not be filed with the Ministry or Corporate Affairs, which is required for Limited Liability Partnerships and Companies.
Is audit required for a Partnership firm?
It is not necessary for Partnerships to prepare audited financial statements each year. However, a tax audit may be necessary based on turnover and other criterion.