With every financial year, all LLPs registered with the Ministry of Corporate Affairs should send annual reports and account statements. An LLP is expected to file a report irrespective of whether it has done any business.
It is compulsory to prepare financial statements and it doesn’t matter if any commercial activity is conducted or not. This is because the information will be shared with the ministry via forms. According to the double entry system, the records are prepared on cash or accumulated basis at owner’s request. Such accounts and statement shall be held at LLP's registered office address. Even if no business transaction is carried out throughout the whole financial year it is still necessary for LLP to be filed to record the initial expenditure and assets incurred for its first financial year.
Financial statement includes preparing of general purpose financial statements which further includes its balance sheet statement of profit and loss statement of cash flow and income tax statement.
For all LLPs, auditing is not compulsory; however, this depends on the specified requirements. For the LLP with turnover exceeding Rs 40 Lakh and Partner's Capital Contribution exceeding 25 lakh, the requirement of mandatory audit will be imposed.
LLP Annual Return Filing will be carried out by means of LLP e-Form 11. The form will require details of the Partners and changes, if any, along with capital information during the year. Changes during the reporting period will be intimated or updated by this form. The Partners should also ensure that LLP Form 3 & 4 if any were required to be filed will be submitted and verified before actually filling this form.
Those LLP who are supposed to submit the tax audit are required to file the income tax returns before 30th September each year and others will have to file till 31st July.
In the form of statutory registers, each LLP incorporated under the LLP Act, 2008 is required to maintain certain records about the organization.
Higher Credibility
For any corporation, compliance with the law is a primary requirement. The record of annual LLP filing is shown on the LLP's Master Data website on MCA and any individual may access the same. Compliance is a primary criterion to assessing the organization's credibility for loan approvals or any other relevant criteria.
Record of Financial Worth
The reports submitted by the LLP are available to companies Therefore, when entering into agreements or major projects, the party concerned may also inspect the financial value. LLP's annual report shall provide a record of its financial value and ability to an interested person or party.
Maintain Active Status and Avoid Penalties
In the case of a consecutive failure in annual filing, the LLP may be considered extinct or may be awarded default status. Members may also be considered defaulters and may also be excluded from further appointment to the LLP or business. Thus, LLP needs to file a return to retain active status. Annual reporting also protects the LLP from heavy extra fees and penalties.
Easy Conversion and Closure
Annual filing is very important for the conversion of the LLP to any other organization. Regular compliance records make the conversion task easier. The same applies to the closure of the LLP. Even if the LLP has not been operational, the Registrar may ask for an additional LLP filing fee to be complied with on an annual basis, if applicable.
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