Do I need to file annual return for LLP with no transaction?

Limited Liability Partnership enjoys separate status since its inception in eyes of law i.e. since its incorporation. Maintaining the status “Active” with Ministry of Corporate Affairs is mandatory which requires following provisions and filing requisite forms by the LLP. Non-filing may burden you with additional fees and hassles at future period and requirements of change or updating details of LLP.

The Partners normally raise question that why one shall make these filings even if there is no single transaction undertaken or there is no profit. To answer this, I would briefly say unless the applicant furnishes the details with the Ministry or concerned authority, how the authority will know about no transaction or the activities? Correct? Now when you are confirmed with logic, know how provisions mandate the filings with Ministry.

Financial Disclosure requirement for any Limited Liability Partnership are provided under Chapter VII of the Limited Liability Partnership Act, 2008. Below listed are the steps to make sure you reach to steps of Annual Compliance without any hassle.

Closure of Financial Year:

An LLP incorporated after October of any year has an option to choose its Financial Year Closure, which can fall in immediate next March or the next March i.e. if an LLP is incorporated after October, 2017 it can close its Financial Year in March, 2018 or March, 2019. However, as per Income Tax Act, any entity can extend its First Financial Year up to 15 month only. Hence, in order to avoid the discrepancy and chances of penalties, we choose to close the financial year in March, 2018 by compliance of both provisions at once. Therefore, LLP incorporated after January, 2018 can close its Financial Year in March, 2019. Any LLP incorporated in or before December, 2017 will be required to close the Financial Year in March, 2018 and proceed accordingly for LLP Annual Return filing.

1. Accounting & Bookkeeping:

Whether any commercial activity is undertaken or not preparation of Financial Statements is mandatory as the details will be furnished with the Ministry through forms. The accounts shall be prepared on cash basis or accrual basis according to double entry system at the wish of owner. Said accounts and statements are to be maintained at the registered office address of the LLP. Even if no commercial transaction is undertaken during whole year, the LLP will be required to record the preliminary expenses and capital introduced for its first Financial Year. Therefore, incorporating such entries for preparation of Financial Statement will be required.

2. Audit of books of accounts:

Audit is not mandatory for all LLP; however, it depends on the criteria prescribed. The requirement of mandatory audit will be levied on the LLP having turnover exceeding Rs 40 Lakh or Capital Contribution of Partner exceeding 25 lakh. Where the turnover criterion doesn’t concern you, contribution of capital shall also be kept in mind. Once the requirement of audit will be levied on LLP, it shall be continued afterwards irrespective of limit prescribed.

3. Annual Return Filing of LLP:

LLP Annual Return Filing will be done through LLP e-Form 11. As the name suggest, the formwill require furnishing the details about the Partners and change, if any along with the information for capital during the year. The changes during the reporting period shall be intimated or updated by this form. The Partners should also make sure that LLP Form 3 & 4, if any were required to be filed is submitted and approved before filing this form.

Due Date: Within 30 days of Financial Year end i.e. 30^th May of succeeding Financial Year.

4. Filing of Income tax Return:

Filing Income Tax Return is inevitable part of the compliance requirement for any Limited Liability Partnership. Due date of Income Tax Return filing will be decided based on the applicability of Audit on LLP. The audited Financial Statements will be furnished in the month of September, whereas the unaudited statements will be filed in July of the concerned assessment year. Refer following table for last date of ITR filing for Financial Year 2017-18.

5. Statement of Account & Solvency:

The Statement of accounts will be filed in LLP e-Form 8,where all the financial transactions and commercial activities of the LLP will be reported.The form will be required to be filed before 30^th October of succeeding Financial Year. The declaration will be given by all the partners regarding the ability to pay the debts by the LLP (declaration of Solvency).

Form 11 and form 8 will be filed with Ministry of Corporate affairs on its online portal with payment of requisite fees.The failure to file the forms before due dates prescribed will lead require payment of Rs 100 per day of delay while filing the forms.The responsibility to file regular returns will be of Designated Partners. The amount of additional fees will be payable by the LLP however, the amount of penalty will be payable by both LLP and Designated Partners as prescribed below.

 Penal provisions:

For LLP: Fine not less than Rs 25,000/-, which may extend to Rs 500,000/-

For Designated Partners: Fine note less than Rs 10,000/-, which may extend to Rs 100,000/-

 Conclusion:

The requirements mentioned above are compulsory to be followed irrespective of any number of transactions or amount of turnover.The due date of online annual filings of LLP will be decided as per the Financial Year end date. After incorporation, the LLP shall make sure filing of all annual returns and compliance requirements for each financial year till its closure or winding up. Where the LLP wants file any application for closure or change, the Registrar may ask to file the annual returns by payment of additional fees before processing of application. Therefore, fulfilment of these requirements is mandatory in any case for the LLP.