Know About Audit Applicability In LLP
Like companies and partnerships, there is one more business entity that is important to discuss because of its popularity. That is LLP or limited liability partnership.
Although a limited liability partnership is new yet fascinated to many parties to choose it because of the benefits, it offers to them, here we are going to discuss that and see the criteria for LLP auditing.
When you see, you will find out that limited liability partnership is a new concept in the business world but then also grabbed the attention because of its features.
Like others, it is also a legal business entity where partners meet to acquire as much profit as they can with minimal investment. This business structure is completely profit-driven.
Here all the partners share very minimum or limited liability, so no partner can be held responsible for the wrong deeds of another partner in the partnership. So all partners can secure their personal assets.
Limited Liability Partnership is also one of the cost-effective business entities because it requires very minimal capital investment and other business costs. So there is no limit to the minimum investment.
And that is why it is great for small and medium-sized businesses and startups, as it doesn’t require much capital investment and business costs. This business structure is generally chosen by the professionals like accountants, lawyers, solicitors, but other people can also choose it.
With that, what makes it popular is the freedom given. Here is a limited liability partnership, all the members have great freedom, and they are not bound to each other.
Criteria For Audit
Every limited liability partnership has to register itself with the Ministry of Corporate Affairs (MCA) and have to file the statement of accounts with annual returns.
A limited liability partnership also has to maintain annual books of accounts. The books of account shall be kept at the registered office of the LLP or at any place decided by all the members.
Now, if any limited liability partnership has a turnover of more than Rs. 40 lakhs or contribution by the partners exceeds Rs. 25 lakhs in any financial year, then it has to mandatorily audit its books of accounts.
Any LLP that is fulfilling this condition has to appoint an LLP auditor who should be a practicing chartered accountant. But if the LLP has a turnover of less than Rs. 40 lakhs or contribution by the members less than Rs. 25 lakhs, then it is not mandatory for them to conduct an audit.
Audit Under LLP Act
According to section 24 in the Limited Liability Partnership Rules 2008, an LLLP only has to audit its accounts by the chartered accountant if it crosses the turnover of Rs. 40 lakhs or contribution over Rs. 25 lakhs.
It also says that,
- The limited liability partnership has to preserve its books of accounts for eight years after the date on which are they are made.
- Every limited liability partnership requires to file the statement of account and solvency in form 8 with the office of the registerer within the next 30 days from the end of 6 months of the relevant financial year.
- The statement of accounts and solvency of the LLP has to be signed on behalf of the partnership by its designated partners.
These are some of the noteworthy points from the act which every limited liability partnership has to keep in mind. But there are many more conditions for the LLP which they need to follow.
So this is all about limited liability partnership and what benefits it offers. Because of the freedom it gives and the minimum capital investment requirement, it is a perfect mix of companies and partnerships.
But with that, you have to keep in mind the auditing and filing of your LLP if you want to protect yourself from any penalties.