In Brief –
Unlike Companies, not all Limited Liability Partnerships (LLPs) are not required to get their books of accounts audited. A private limited company has to get its books of accounts audited irrespective of its turnover and capital. However, an LLP is required to get its books of accounts audited only if it crosses a certain turnover limit, or when the total capital contribution of partners exceeds a certain limit.
- Though every LLP which is registered with the Ministry of Corporate Affairs (MCA) has to file the Annual Returns and Statement of Accounts
- All LLPs are required to maintain the Books of Accounts in Double Entry System and has to prepare a Statement of Solvency (Accounts) every year ending on 31st March.
- Certifications from Company Secretary in Practice (PCS): In case of LLPs with turnover more than five crore rupees in a financial year or contribution more than fifty lakh rupees, the annual return shall be certified by a Company Secretary in Practice.
Liability for audit (audit applicability) and audit limits of an LLP
Only LLPs whose turnover exceed Rs. 40 Lakh or whose contribution exceed Rs. 25 Lakh are required to get their accounts audited by any Chartered Accountant in practice. So, all other LLPs are exempted from audit of their accounts. Note that like Companies, an auditor or auditors of an LLP shall be appointed for each financial year of the LLP for auditing its accounts.
LLPs have to appoint an auditor within 30 days before the end of the financial year. In other words auditor has to be appointed before 1st March every year.
Appointment by designated Partners
The designated partners may appoint an auditor:
- At any time for the first financial year but before the end of the Financial Year
- Within 30 days before the end of the Financial Year
- To fill a casual vacancy in the office of auditor
- To fill up the vacancy caused by removal of an auditor
- If the designated partners have not appointed then the Partners can assume this responsibility
- An Auditor shall hold office from the day the previous auditor cease to hold office and upto the end of the next period for appointing auditor unless re-appointed
Audit of Exempted LLPs
LLPs who are exempted from mandatory audit may also get their accounts audited incase its partners want to get the books of accounts audited. However, the accounts shall be audited only in accordance with the Limited Liability Partnership Rules, 2009.
Relaxation to LLPs
LLPs which are mandatory required to get their accounts audited may decide not to get the books of accounts audited. However, such LLPs shall have to file a Statement of Accounts and Solvency, a statement by the partners to the effect that the partners acknowledge their responsibilities for complying with the requirements of the Act and the Rules with respect to preparation of books of account and a certificate in Form 8.
Penalty on Non-compliance
In the case of non- compliance of the above rules, LLP as well as designated partners are liable to a penalty for contravention. LLP shall be punishable with fine which shall be minimum of twenty-five thousand rupees but which may extend to five lakh rupees and every designated partner of such limited liability partnership shall be punishable with fine which shall be minimum of ten thousand rupees but which may extend to one lakh rupees.
Contact Us for any assistance on Limited Liability Partnerships including incorporation, accounting, returns filing and audit.
The taxes applicable to an LLP is similar to that of a Partnership firm. A partnership firm is taxed separately from its partners and the tax rate applicable for a partnership firm is 30% (add health and education cess). Limited Liability Partnerships too are tax at 30%. This is quite similar to the tax rates applicable to a private limited company.
Taxation of Partners in an LLP
Partners receive remuneration and interest on capital provided by them to the firm and the firm can claim deduction for such remuneration and interest while arriving at its taxable income. However, to claim partner remuneration and interest on capital as a deduction, there must be specific provisions in the LLP Agreement. The LLP Agreement must specially and unambiguously have clauses that allow for payment of remuneration and interest on capital and loan provided by the Partners. The remuneration is payable only to individual partners who are actively engaged in conducting the affairs of the business or profession of the firm. The receipt of remuneration and/or interest from the LLP is taxed as business income in the hands of the LLP Partner.
Income Tax Return Filing
All LLPs are required to file Income Tax returns each year on or before 30th September in case they are subjected to audit. If audit is not applicable, returns have to be filed by 31st of July. The income tax return of a LLP must be signed by the Designated Partner. If the designated partner is not able to sign the income tax return of the LLP for any unavoidable reason, then it can be signed by any of the other Partners.
Board Meetings –
Is it compulsory to hold a board meeting or annual general meeting? – No, there is no compulsion on board meeting or annual general meeting of the partners.