Limited Liability Partnerships (LLPs) combine the benefits of a partnership with the limited liability of a company. While LLPs enjoy operational flexibility, they are still subject to various regulatory and statutory compliance requirements under the Limited Liability Partnership Act, 2008 and related rules in India. Non-compliance can result in serious consequences — both financial and legal.
This article explores the various consequences LLPs may face for non-compliance.
Failure to comply with statutory requirements typically results in financial penalties. Some of the common defaults and their financial implications include:
LLPs are required to file various forms with the Ministry of Corporate Affairs (MCA), such as:
Penalty for Delay:
As per the LLP (Amendment) Rules, 2022:
₹100 per day per form of delay
No upper cap on the penalty
Failure to file Form 11 or Form 8 on time can result in the LLP being treated as non-compliant.
LLPs failing to pay registration or filing fees attract interest and penalties, and the LLP may be barred from further filings until dues are cleared.
Designated Partners of LLPs have the legal responsibility to ensure compliance.
If the LLP fails to file annual returns or financials for three consecutive years, the Designated Partners may be disqualified.
Disqualified individuals may be barred from being appointed as directors or designated partners in any LLP or company for five years.
Under Section 75 of the LLP Act, 2008, the Registrar of Companies (RoC) can initiate action to strike off an LLP from the register if:
The LLP is not carrying on business for two years or more and has not filed Form 8 and Form 11
The LLP is inactive or non-responsive to notices
The LLP ceases to exist as a legal entity, and its name is removed from the register.
Non-compliance may also lead to prosecution under the LLP Act. For instance:
Failing to comply with orders or directions from authorities
Furnishing false statements or financial data
Non-maintenance of statutory registers or books
Fines ranging from ₹10,000 to ₹5 lakhs, depending on the nature of the default
Imprisonment of partners in extreme cases (e.g., fraud, willful concealment of information)
Compliance history plays a critical role in:
Attracting investors
Availing loans or credit facilities
Participating in tenders or government projects
Non-compliance damages the credibility and reputation of the LLP and can impact future business opportunities.
Governments often offer incentives, subsidies, and reliefs to compliant entities. Non-compliant LLPs may be ineligible for:
Start-up recognition
MSME benefits
Tax incentives and exemptions
A non-compliant LLP may face:
Restrictions on filing new forms
Inability to alter LLP agreements
Challenges in obtaining DIN (Director Identification Number) or DPIN (Designated Partner Identification Number)
To close an LLP through voluntary strike-off under Form 24, the LLP must:
File all overdue returns
Settle all dues
Non-compliance delays or disqualifies an LLP from availing easy exit options.
Compliance for LLPs is not merely procedural; it safeguards the legal standing, operational continuity, and reputation of the business. The consequences of non-compliance are significant — ranging from monetary losses and disqualification to legal action and loss of business credibility.
Maintain timely filings of Form 8 and Form 11
Ensure annual financial statements and returns are accurate
Keep statutory registers and records updated
Regularly check for compliance notices from MCA
Engaging a professional or company secretary to manage compliance can help LLPs stay updated and avoid penalties.