Taxation & Compliances

Knowledge Base - Taxation & Compliances

01. Whether every LLP would be required to maintain and file accounts?

An LLP shall be under obligation to maintain annual accounts reflecting true and fair view of its state of affairs. A “Statement of Accounts and Solvency” in prescribed form shall be filed by every LLP with the Registrar every year.

02. Whether audit of all LLPs would be mandatory?

Audit of LLPs shall be mandatory. However a more simplified compliance regime for small LLPs is being proposed by exempting such LLPs from the requirement of audit by exemption through notification by the Central Government.

03. Whether any provisions in respect of ‘mandatory insurance’ are being proposed in the Act?

No mandatory insurance is being proposed in the Act. It would be difficult to assess insurance requirements of different types and sizes of LLPs. This would depend upon the nature of commercial risk attached with work or assignment handled by each. Applying common insurance requirements across a class of LLPs would result in increasing their costs of operation.

04. Whether any Annual Return would be required to be filed by an LLP?

Every LLP would be required to file with ROC, every year, an Annual Return, contents of which would be prescribed under rules.

05. Whether the Registrar would have any power to call for information from LLPs?

Registrar would have power to obtain such information which he may consider necessary for the purposes of carrying out the provisions of the Act, from any designated partner, partner or employee of the LLP.

06. How would compliance management be ensured in the Act?

The provisions of the Act require LLPs to file the documents like Statement of Account and Solvency (SAS) and Annual Return (AR) and notices in respect of changes among partners etc. within the time specifically indicated in relevant provisions. The Act contains provisions for allowing LLPs to file such documents after their due dates on payment of additional fees.

07. What are the measures, which can be taken against an LLP, which has engaged in fraudulent activities?

Central Govt may appoint inspectors to investigate the affairs of an LLP. The manner and procedure for conduct of investigation has been specified in the Act.

08. What will be the role of Government in regulation of LLPs?

LLP structure is proposed to allow entrepreneurs and businessmen/servicemen to combine themselves with a view to run a business/service for profit in a more flexible manner than companies. The internal processes of LLPs shall be governed by the LLP Agreement.

09. What is the tax treatment being provided for LLPs?

As advised by the Ministry of Finance, Taxation of LLPs has been left to be provided for under the Income Tax Act, 1961.

10. Broad provisions in respect of Offences and Penalties

Offences and penalties arising out of the non-compliance with the provisions of the Act have been defined along with the substantive provisions themselves.

11. Whether offences would be compounded under the LLP Act? Whether any protection to whistle-blowers is being proposed in the Act?

The Act contains provisions empowering Central Government to compound any offence punishable with fine only by collecting a sum not exceeding the amount of maximum fine prescribed for the offence.
Enabling provisions have also been made in the Act in respect of protection to “Whistle Blowers”

12. Whether electronic filing of documents with ROC would be allowed?

The Act contains enabling provisions for use of electronic mode for filing of documents with Registrars. Details would be specified in the Rules. Authentication of documents as per Information Technology Act, 2000 has also been recognized in the LLP Act.

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