LLP Compliance Post Incorporation
Post Incorporation Compliance by a Limited Liability Partnership
Obtaining the Certificate of Registration for your Limited Liability Partnership (LLP) is an exciting moment in your business start-up journey. You might have gone through the process of arranging needful documents as per prescribed standards of Ministry of Corporate Affairs and also insisted by the professionals who have assisted with certifications for your LLP Registration. Now you know the selecting a name for your LLP is more difficult than naming your baby.
Your LLP is born as an artificial legal person with certain inherent features, rights, powers and liabilities. Partners are the owners of the LLP and the Partners/Designated Partners are the brains and organs of a registered LLP. In other words you the Partners and Designated Partners are the Parents and Guardians of your LLP. As a Parent and Guardian of your LLP, you are responsible for the actions and inactions of a registered LLP and are personally responsible to answer the regulatory authorities for any non-compliance of any legal requirements by a LLP.
Obtaining the Certificate of Incorporation is only a starting point for a series of compliances a LLP has to follow under various legislations in India from time to time.
IMMEDIATE STEPS AFTER LLP INCORPORATION
LLP Compliance Post Incorporation
The following are the immediate 10 steps to be taken by the LLP after registration WITH IN 30 DAYS
LLP Compliance Post Incorporation, the Partners of a Limited Liability Partnership are required to execute an LLP Agreement and a copy has to be filed with the Registrar or Companies in LLP Form 3 with in 30 days of incorporation of LLP. LLP Agreement has to stamped as per Stamp Act of respective state where the LLP is registered.
The delay in filing LLP agreement shall attract penalty of Rs.100.00 per day till the date of fling Form 3 with ROC.
2.Application for Permanent Account Number (PAN)
LLP Compliance Post Incorporation has to obtain a Permanent Account Number (PAN) from Income tax department, Government of India. PAN is an identification number for every tax payer under Income Tax Act. For obtaining a PAN, the LLP has to make an application with a copy of its Certificate of Incorporation.
3.Application for Tax Deduction and Collection Account Number (TAN)
LLP Compliance Post Incorporation has to obtain a Tax Deduction and Collection Account Number (TAN) from Income tax department, Government of India. Certain category of payments requires Tax Deduction at Source (TDS) and the tax so deducted must be remitted to the government. To enable the TDS remittance, Tax Deduction and Collection Account Number (TAN) is required.
4.Opening Bank Account in LLP Name
- LLP Compliance Post Incorporation, it is necessary to open a Current Account in the name of the LLP with any Bank in India. All the transactions in the name of the LLP should be transacted through the LLP Bank Account only.
- The following are the documents and details required for opening. A Current Account with a bank:
- Certificate of Incorporation of the LLP
- Copies of LLP Incorporation documents – Form FiLLiP and Form 3 Filed with ROC and LLP Agreement.
- Permanent Account Number (PAN) of the LLP
- Resolution by partners of Opening and operation of bank Account
- KYC details for Designated Partners and Partners of the LLP
- Cheque for initial deposit of amount to Open Bank Account (This deposit can be considered as the capital infusion by the partners)
- Also, the details and documents and initial deposit may vary from bank to Bank. There are banks offering ‘Zero’ balance Accounts as well subject to conditions.
5.Books and Accounts of LLP
Every business is required to under Income Tax Compliances such as Tax Deduction at Source (TDS) and Advance Tax Payments from time to time.
LLP Compliance Post Incorporation has to prepare and keep the books of account in double entry system of accounting on accrual basis. The LLP has to maintain the Books of Accounts of all receipts payments and to comply legal requirements under Companies Act and other various laws. The books of accounts and financial statements shall give a true and fair view of the state of the affairs of the LLP, including its branch office or offices.
Bookkeeping and Accounting starts with recording of accounting transactions such as Receipts and Payments. It is advisable to maintain physical records of each transactions through Payment Voucher & Receipt Voucher (Click the link to download formats). To record a transaction, use the voucher as a cover note for every payment and receipt transactions with relevant supporting documents such as Supplier Invoices / Receipts with Transaction details. These vouchers and supporting documents are the primary reference for each transactions.
The books of account should be kept at its registered office or such other place in India as the Board of Designated Partners may decide from to time. The books of account can be maintained in electronic mode subject to conditions under Companies Act.
6.Shop and Establishment Registration
Every Business Establishments are required to obtain Shop and Establishment Registration under respective State Shop and Establishment Act and Rules within 30 days of registration.
This is a state specific mandatory registration for all the business and establishments. The LLP has to obtain the Shop and Establishment Registration in every state wherever they have offices and establishments.
7.Professional Tax Registration – Employer & Employee
LLP Compliance Post Incorporation is required to obtain Professional Tax – Employer Registration (Enrolment Certificate) within 30 days of incorporation. This again is a state specific labour registration mandatory for all registered business whether you have any employees or not. This registration is subject to renewal every year after payment of prescribed fee. Delay in obtaining the registration will attract penalty to business on yearly basis.
Also, every LLP who employs people with more than the specified limit of salary (this limit varies from State to State) has to obtain Professional Tax – Employee Registration (Registration Certificate), when they start employing people. For this purpose, the Partners / Designated Partners shall be treated as employees if they are drawing salary beyond the specified limits. Also, the employer must deduct the Professional Tax from the salary of employee and pay to the State Govt. on monthly basis.
WITH IN 60 DAYS
8.Infusion of Initial Capital by Subscribers to Memorandum
The initial partners of LLP has to bring the amount of capital contribution as stated in the subscription documents and LLP Agreement at the time of LLP registration within 60 days of incorporation.
Though there is no explicit conditions in LLP Act as to this time limit for bringing the capital, it is advisable to bring the subscribed capital with 60 days of incorporation.
9.Appointment of Auditors
Every LLP whose capital contribution exceeds Rs.25 lakhs or annual turnover exceeds Rs.40 lakhs has to get the accounts audited by a Chartered Accountant in Practice. There is no mandatory audit requirement for other LLP’s.
WITH IN 180 DAYS
10.Goods and Services Tax (GST) Registration
Every business with annual turnover exceeds Rs. 40 lakhs (Service providers 20 lakhs) is required to GST Registration under Goods and Services Tax (GST) Act and Rules.
It is not mandatory to obtain GST immediately after incorporation of the LLP. The LLP can obtain this registration as and when required.
In case the LLP has to produce its GSTIN to any third parties or authorities for its business, the LLP may. has to obtain the GST Registration immediately after registration of LLP.