Introduction

A Limited Liability Partnership (LLP) is a type of business entity with an Indian popularity that reconciles the flexibility of partnership with the limited liability of a company. Benefits it provides include separate legal identity, minimum regulatory burden, efficiency of operation and hence it is a favorite to small and a startup company.

Audits will ensure that the LLP is financially transparent, according to legal compliance, and prevent fraud. On the basis of their turn over and capital contribution LLPs may lay in statutory audits tax audits and accounts to be filed as per Indian statutes.

Understanding the Audit Requirement for LLP in India

Also known as a review, an audit of Limited Liability Partnerships (LLPs) means an independent examination of the company’s financial statements to verify accuracy, compliance and transparency. When it comes to the audit obligations, LLPs are less mandatory than the private limited companies, which are subject only to the audit in case of their turnover and capital contribution: in other words, they are held exempt from the audit when their capital is less than Rs. 100000 and turnover less than Rs. 10 lakh.

In India, the requirements of audit to the LLPs are governed by:

Limited Liability Partnership Act, 2008: Defines LLP formation and compliance requirements.

Companies Act, 2013: In specific cases when an LLP is treated as a corporate entity.

Income Tax Act of 1961: If an LLP reaches certain financial limits, it will be subject to tax audits.

Not all LLPs require audits. Legal requirement for statutory audit by LLP imposes a restriction on the persons whose annual turnover or capital contributions are more than ₹40 lakh and ₹25 lakh, respectively. This exemption helps to make LLPs an attractive business structure for small and medium sized enterprises who would want to minimize the compliance burdens.

Statutory Audit Requirement for LLP

A statutory audit, meant to be cast in stone, is a presence of a Chartered Accountant (CA) to audit a financial accountability of an LLP and ensure that everything corresponds to the required and legal laws. This audit helps to keep financial transparency and governance and also ensure compliance with the Indian laws.

If an LLP meets either of the following conditions, it is required to have a statutory audit.

In a financial year, it has a turnover of more than ₹40 lakh.

At any point, capital contribution is more than ₹25 lakh.

A CA helps in the audit of the Limited Liability Partnership Act, 2008, verify the transactions, carry out the necessary record keeping and assess the compliance with the Limited Liability Partnership Act, 2008 during the period of the audit. Governance structures are also part of the audit process to detect the financial discrepancies or fraud.

Should the LLP and designated partners fail to comply with statutory audit requirements, penalties up to penal fines might be imposed.

Tax Audit for LLP: When is it Required?

As per Section 44AB of the Income Tax Act, 1961, tax audit refers to the process of a studying an LLP’s financial accounting books for conformity with the provisions of the Act.

A tax audit is mandatory if:

·   The LLP has a gross receipts in any financial year in excess of ₹1 crore.

·   Presumptive taxation under Section 44AD/44ADA is chosen by LLP but the income reported is in terms below payment limit.

Purpose of a tax audit is to assure the computation of tax correctly, filing of returns and checking tax evaders. To avoid being penalized the audit report as certified by a Chartered Accountant (CA) has to be filed with the Income Tax department before the due date (usually September 30th of the assessment year).

Exemptions from Audit for LLPs

Statutory audits are not required if turnover of the LLP is less than ₹40 lakh and the capital contribution is less than ₹25 lakh. Smaller LLP’s may however choose to conduct audits voluntarily to gain further financial transparency and credibility. LLPs are required to maintain proper financial records for future business needs and the purposes of tax filing and business regulatory compliance even without an audit requirement. The partnerships with such experts as Starters’ CFO for bookkeeping, compliance, and smooth financial operations.

Compliance and Filing Requirements for LLPs

As per the norms of LLPs in India, a LLP must comply with the mandatory annual compliance requirements, which may include:

·   According to the following due dates, Form 8 (Statement of Accounts & Solvency) must be completed by October 30:

·   Annual Return Form 11 – May 30th.

·   If no audit is required – ITR 5 is due by July 31 and if audited – ITR 5 is due by September 30.

If not compliant, this will result in penalties and/or legal consequences. Starters’ CFO are professional services that ensure LLPs meet deadlines, comply and avoid fines.

Role of a Chartered Accountant (CA) in LLP Audits

Chartered Accountant (CA) has an important role to play with the smooth functioning of an LLP with regards to its financial accuracy and legal compliance.

Within an LLP, a CA has the following key responsibilities in the audit of the LLP:

·   Checking of financial statements for correctness.

·   Detecting errors, fraud, and risks of noncompliance to avoid legit issues.

·   Reporting an audit report to relevant tax regulatory authorities.

A professional CA is employed by an LLP to carry out the auditing of LLPs in order to avoid penalties and to maintain the compliance to the Indian financial laws.

Importance of Audits for LLPs

Audits more than comply with the regulatory frameworks, they improve the financial credibility, which helps increase the investors and lenders. Audits normally take place regularly to detect fraud, errors and ensure transparency in respect of the financial report. Additionally, making decisions and managing risks more efficiently is supported since LLP partners are also involved. Though not mandatory, voluntary audits enhance financial discipline, enhance governance and increase confidence of the company’s stakeholders. LLPs partner with Starters’ CFO to help them in maintaining accurate records and meeting compliance standards without any hassle.

How Starters’ CFO Can Help with LLP Compliance & Audits

CFO of a LLP Starts’ provides complete LLP audit and compliance services like:

✔ Meeting regulatory statutory audits requirements.

✔ Audit for tax filings that is accurate.

✔ Filing for Form 8, Form 11 and ITR-5 annually.

✔ Advisory in tax planning and advisory in financial management to optimize it.

Starters has a team of expert CAs and financial professionals, so LLPs are always fully compliant with Indian regulations. And modern technology helps businesses with timely and error free compliance filings at much more cost effective price with accurate reporting.

Need expert LLP audit solutions? Contact Starters’ CFO today!

Conclusion

LLP needs an audit to meet compliance, keep records accurate and transparent. Audits should be timely as it helps the businesses avoid penalties, increasing credibility and assisting in making better decisions. Working with an LLP Auditor Partner like Starters CFO gets you compliant and stress-free, especially when it comes to the LLP audits, and tax compliance, and financial management services. Contact us today!