Statement of Account & Solvency [LLP: Form 8]

Introduction:

A limited liability partnership refers to a form of partnership that reduces the liability of partners to the full extent of their capital investments and allows the partners to organize their internal structure into a hybrid of a company and a partnership.

According to Section 3(1) of the Limited Liability Partnership Act, 2008[1], a limited liability partnership (LLP) is a body corporate formed and incorporated under this Act and is a legal entity separate from that of its partners. It needs to be registered, as an unregistered partnership, it qualifies as a partnership, will be treated as one under Indian Partnership Act, 1932, i.e., every partner will have unlimited liability.

Like any partnership, it is based on an agreement. As per Section 23(2) of the Limited Liability Partnership Act[2], the limited liability partnership agreement and all the changes that are made in it are required to be filed and sent to the Registrar of Companies in the correct form and manner as prescribed.

It is mandatory that, at the end of the financial year, every LLP must file an annual return (via Form 11) and a balance sheet (via Form 8) every year whether the LLP is still in business or not.

Need of Form 8

Every limited liability partnership has to maintain books of accounts (on either cash basis or accrual basis) which should disclose the financial position, assets, and liabilities, cost and sale of goods, inventories, etc., and these elements must be displayed well using Form 8, which is known as Statement of Accounts and Solvency.

A limited liability partnership is required to file Form 8 within 30 days from the end of six months of the financial year (till 30^th October) and all the accounts of the partnership need to be audited.

In addition to the financial position, the partnership must also disclose that:

• The turnover exceeded ₹40,00,000
• The limited liability partnership has already filed a statement of any and all modifications made in the previous financial year to the Registrar of Companies
• The partners/representatives have taken care of and are responsible for maintaining proper records.

According to Section 34(2)[3] and (3)[4] of Limited Liability Partnership Act, 2008, read with Rule 24 of Limited Liability Partnership Rules, 2009[5], every LLP needs to keep books of accounts that are sufficient to show and explain the LLP’s transactions, and these books will disclose the financial position in absolute transparency and accuracy and shall enable the designated partners to ensure that any Statement of Accounts and Solvency prepared will comply with the Rule and Section of the respective Statutes.

Instructions for Filing Form-8

Certain guidelines and instructions need to be complied with and adhered to by every limited liability partnership while filing Form 8, and some of these instructions are:

• It must be attested by signatures of all designated partners, with a certified Chartered Accountant present as a witness, who must sign it as well.
• It must contain details like a declaration on the state of solvency of the LLP by the partners, information related to the statement of assets and liabilities, and statement of income and expenditure of the LLP.
• It shall be filed through electronic mode without any processing at the office of the Registrar of Companies.
• The form must be filed within 30 days from the end of 6 months of the respective financial year. Therefore, Form 8 must be filed before 30^th October of every year.

Structure of Form-8

Form-8 mainly consists of two parts:

1. Part A – Statement of Solvency: Part A or Statement of Solvency declares the situation of the solvency of the limited liability partnership by the partners, with the additional information of assets and liabilities managed by the partnership firm.
2. Part B – Statement of Accounts and Income & Expenditure: Part B or Statement of Accounts denotes the total amount in each partner’s accounts and the funds in their names, their liabilities, both personal and towards the partnership firm, as well as the assets managed by the partners.
   In addition, this Part also covers the total expenses and incomes incurred and gained respectively by the partners individually as well as by the firm as a whole.

Procedure for Filing Form-8

The procedure for filing Form-8 is simple, and due to it being online, it is mostly taken care of by the portal of the website of the Ministry of Corporate Affairs (MCA) (https://www.mca.gov.in/content/mca/global/en/home.html).

 The procedure is as follows:

1. Download the form as well as the instruction kit from the website.
2. Write the LLP’s name, and once it is available in the portal, get the LLPIN corresponding to it.
3. Using the “Pre-fill” button (this provides the option of using the MCA database to fill any fields for which the information is provided), fill the form till Part A, point 1.
4. Fill Part A thoroughly, and denote zero amount (“0”) where there is no amount to mention.
5. Attach the requisite additional documents.
6. Use “Check” and “Pre-scrutiny” buttons to thoroughly re-check the Form, and once satisfied, sign and submit the form, paying the fees simultaneously.

Documents to be Attached

Due to its immense importance, Form-8 needs additional information to confirm the accuracy of the financial position of the partnership firm.

This additional information can be displayed through certain documents, which are as follows:

• Disclosure under Medium, Small, and Micro Enterprises Development Act, 2006 (mandatory).
• Statement of contingent liabilities (optional).
• Audited financial statements
• Any other additional documents, as required.

Fees for Filing Form-8

Unfortunately, while it is pertinent, filing any form in the Ministry of Corporate Affairs portal is not free, and Form-8 is no exception.

It has a substantial, but reasonable, fee attached, and it usually ranges from ₹50 to ₹200.

Tabulated, the breakdown of the fee as per the type of LLP is as follows:

CONTRIBUTION IN LLP	FEES APPLICABLE
Having contribution up to ₹1,00,000	₹50
Having contribution more than ₹1,00,000, but till ₹5,00,000	₹100
Having contribution more than ₹5,00,000, but till ₹10,00,000	₹150
Having contribution more than ₹10,00,000	₹200

It must be noted that for foreign limited liability partnerships, the filing fee is ₹1,000.

Certifications Required for Authenticating Form-8

Any and all certification for Form-8 will be done by a Chartered Accountant, a Cost Accountant, or a Company Secretary, however, if it is certified by a partner or authorized representative, then further certification by a practicing professional will be needed.

If the turnover exceeds ₹40,00,000, all mandatory accounts, financial statements, and Form-8 will need to be audited and certified by the appointed auditor for the partnership firm.

This sort of certification will verify that:

1. All particulars filled in the form from the limited liability partnership’s records are true and correct.
2. The statements of assets and liabilities, income and expenditure, and solvency as well as the documents attached for these statements are true and correct.
3. The attachments required for verification of accuracy, are complete, true and correct, and properly attached.

Consequences for Non-Filing or Late Filing of Form-8

Every limited liability partnership needs to file Form-8 in the required time, and if they don’t, they have to deal with consequences.

These consequences are:

• Additional Fees: Aside from the total fee required to be paid for submission for the form, delay in submitting it will attract an additional fee of ₹100 per day till the date of filing this form.
• Fine for non-filing of Form 8: If any partnership firm fails to file the Statement of Accounts and Solvency with the Registrar of Companies on time, as per Section 34(5) of the Limited Liability Partnership Act, 2003, the firm will be liable to pay fine which shall not be less than ₹25,000, but can extend to ₹5,00,000.
  In addition, every partner of the firm shall be liable to pay a fine which shall not be less than ₹10,000 but can extend to ₹1,00,000.

Conclusion

A partnership, while beneficial in the long run, suffers from a crucial demerit: unlimited liability. This element shackles the partners to the point that they are liable for their personal assets, and if the partnership is sued, it creates a major problem. This is easily solved by a limited liability partnership, where the partners are only liable to a certain extent, i.e., till their capitals. No LLP is governed by the Indian Partnership Act, 1932, but rather, Limited Liability Partnership Act, 2008, which gives them more liberty compared to traditional partnership firms.

However, every corporate entity has to abide by some compliances, and an LLP is no exception. The two most important annual submissions, annual returns (Form 11) and balance sheets (Form 8) have to be filed with the Registrar of Companies promptly, failing which, certain consequences are to be incurred.

---

References:

FOOTNOTES

[1] Section 3 in The Limited Liability Partnership Act, 2008, INDIAN KANOON, https://indiankanoon.org/doc/113974804/ (last accessed on 2^nd August, 2021)

[2] Section 23(2) in The Limited Liability Partnership Act, 2008, INDIAN KANOON, https://indiankanoon.org/doc/196777550/ (last accessed on 2^nd August, 2021)

[3] Section 34 in The Limited Liability Partnership Act, 2008, INDIAN KANOON, https://indiankanoon.org/doc/77949033/ (last accessed on 2^nd August, 2021)

[4] Ibid.

[5] Section 24 in The Limited Liability Partnership Rules, 2009, INDIAN KANOON, https://indiankanoon.org/doc/159257255/ (last accessed on 2^nd August, 2021)

BARE ACTS AND BOOKS:

• B.K Goyal, Company Law, 1.22 (14^th edn., Singhal Law Publications, 2019)
• Companies Act, 2013
• Limited Liability Partnership Act, 2008
• Limited Liability Partnership Rules, 2009

WEBSITES

• Limited Liability Partnership (LLP), TOPPR, https://www.toppr.com/guides/principles-and-practice-of-accounting/introduction-to-partnership-accounting/limited-liability-partnership-llp/ (last accessed on 2^nd August, 2021)
• Annual filings for Limited Liability Partnership (LLP), CLEARTAX, https://cleartax.in/s/llp-annual-filings (last accessed on 2^nd August, 2021)
• Limited Liability Partnership, BOMBAY CHARTERED ACCOUNTANTS’ SOCIETY, https://www.bcasonline.org/Referencer2015-16/Other%20Laws/limited_liability_partnership.htm (last accessed on 2^nd August, 2021)
• Laxmi Navlani, LLP Form 8: Statement of Account & Solvency, QUICKO, https://learn.quicko.com/llp-form-8-statement-of-account-solvency (last accessed on 2^nd August, 2021)
• Laxmi Navlani, Procedure to File LLP Form 8 on MCA Portal, QUICKO, https://learn.quicko.com/procedure-to-file-llp-form-8-on-mca-portal (last accessed on 2^nd August, 2021)
• INSTRUCTION KIT FOR FORM-8, MINISTRY OF CORPORATE AFFAIRS, https://www.mca.gov.in/LLP/dca/help/instructionkit/1127-Form8LLP_help.PDF (last accessed on 2^nd August, 2021)
• IndiaFilings, LLP Form 8, INDIA FILINGS, https://www.indiafilings.com/learn/llp-form-8/ (last accessed on 2^nd August, 2021)
• Team CAGMC, Annual Filing of LLP (Form -8 and Form -11) for Financial Year 19-20, GOYAL MANGAL & CO CHARTERED ACCOUNTANTS, https://www.cagmc.com/annual-filing-of-llp-form-8-and-form-11-for-fy-19-20/#form-8 (last accessed on 2^nd August, 2021)