Understanding Limited Liability Partnerships and their Compliances
Limited Liability Partnership is a form of business association. The benefit of LLPs is that it poses dual benefits of a partnership as well as of a corporate company. Registrar of companies with the Ministry of Corporate Affairs regulates or set a framework for the functioning of the LLPs. Why LLPs are preferred over other business association options can be understood by evaluating the benefits. The benefits can be listed as follows:-
• Limited Liability means Limited Risk
LLPs enjoy a distinct entity and hence, the liability of the entity may be enforced on the partners or investors only to a certain extent. This prevents unlimited liability or risk for investors.
• Ability to perform buying, selling or holding transactions
By having a distinct legal setup, the LLPs can engage in buying or selling of assets movable or immovable in nature. They may also indulge in buying or selling of intangible assets. In addition to buying or selling, the LLPs can hold assets and get into any legal contracts.
• Sue and get sued
The LLPs have the power to sue as well as other individuals, entities, etc., can sue the LLP for compensation. It could be a boon as well as a curse for the investors or partners as they might be liable to a certain extent if the LLP is sued.
• Bank account
The LLP can open a bank account in its name, which will be a business account and can have facilities such as overdrafts and other beneficial credit terms.
The LLP as a firm can employ people, which might not be possible for a sole proprietor.
Compliance for LLP
With power comes greater responsibilities and compliance. With the above characteristics or benefits the compliance or responsibility of the LLP also increases towards the public, government as well as its investors/partners. Some of the key aspects of Compliance for LLP can be listed as follows:-
• Accounting and Bookkeeping
Accounting and Bookkeeping audits by a qualified Chartered Accountant are mandatory requirements for people who a turnover beyond 40 Lakh Rupees. It is also mandatory if the invested capital is over 25 Lakh Rupees. To maintain books, it is essential to evaluate the method of bookkeeping cash or accrual. Both have their own benefits and drawbacks a good Accounting and Bookkeeping Services firm shall help you identify the best option for your business.
• Documents to maintain
LLP Firm Compliances mandates the storing, safeguarding or maintaining a certain set of documents that include incorporation certificate, partner information, fee receipts, account statements, annual returns or any solvency returns filed by the LLP and a lot more.
• Return Filing Requirements
Accounting and Bookkeeping Services are mandatory for LLPs because they need to file the return irrespective of turnover or profits or revenues. An LLP which has not performed a single transaction throughout the year might also need to file a return to be compliant. The Annual return filing compliance also requires an LLP to file two forms, Form 8 and Form 11 as well.
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