Audit Requirements for LLP: Understanding LLP Audit Applicability

30 April 2025

Limited liability partnerships (LLPs) have become a popular choice for professionals, startups, and small businesses in India due to their flexible structure and limited liability advantage. However, like any other business entity, LLPs are also subject to compliance and audit requirements under the LLP Act, 2008, and the Income Tax Act, 1961.

LLP stands for Limited Liability Partnership, which is extremely popular among professionals, startups, and small businesses in India. The reason is obviously its flexible structure and limited liability benefits. Despite being a widely recognized structure, it requires compliance with the latest regulations.

Let’s figure out major requirements for the audit in this case. But first, let’s introduce you to it.

What Is an LLP Audit?

An LLP audit is like other audits, which ensure that the financial records and statements of this company structure are absolutely true and compliant with regulations. This is a technical concept, which requires a certified chartered accountant for verifying transactions. This is practically needed to prove that the financial statements are true and absolutely fair and that the business practices comply with relevant laws and regulations.

However, the registered companies have to mandatorily pass through audits. But an LLP’s audit is an exception, which is applicable only when it reaches the requisite financial threshold.

When Is an LLP Audit Mandatory? (LLP Audit Applicability)

So, when is it necessary? Let’s make it crystal clear.

The LLP Act, 2008 clearly states that the company has to pass through the audit. Specifically, the Rule 24 of the LLP Rules states:

The audit is a must if its annual turnover surpasses ₹40 lakh in any financial year, or
If the capital contribution crosses over ₹25 lakh at any point during the financial year.

The aforesaid conditions make it necessary to hire a qualified chartered accountant to examine the accounts of the LLP.

Crucial Update (Effective from April 1, 2025)
In 2025, the regulatory framework underwent revision, which shows no change in the annual threshold and capital contribution criteria. Moreover, the authorities are now going to be stricter than ever over its scrutiny if the applicant does not file the Form 11 (Annual Return) and Form 8 (Statement of Accounts and Solvency) for the audit of his or her LLP.

Income Tax Audit for LLP

Apart from the audit under the LLP Act, this company may have to pass the scrutiny test under the Income Tax Act 1961, provided that :

Its gross turnover crosses ₹1 crore (for businesses) in a financial year, or
Its gross receipts pass over ₹50 lakh (for professions) in a financial year, or
It prefers a presumptive taxation scheme under Section 44AD/44ADA and shows profits lower than the defined limit.

New Income Tax Compliance Update (2025):

For this company, the tax audit is a must if its limit reaches or exceeds ₹3 crore for a business where cash payments must not pass over 5% of total turnover.
Likewise, professions’ tax audit limit is defined as ₹75 lakh or more, and it is in cash.
In case an LLP primarily deals digitally within these limits, a tax audit won’t be mandatory.

Audit Not Mandatory: Voluntary Audit

What if the company does not exceed the aforementioned threshold? Obviously, the audit won’t be required. But it can be voluntarily audited provided the partners show their consent over it, believing that it attracts credibility. This is also necessary for internal governance, third-party requirements, or due diligence at the time of mergers and acquisitions.

Forms and Filing Requirements for Audited LLPs

As the auditory requirements are over, these steps are a must:

To file Form 8 (Statement of Accounts and Solvency) with the Registrar of Companies (RoC) every year for audit. The form should have the signatures of partners and the auditor.
Filing of Form 11 (Annual Return) is essential to reveal the summary of its management structure and partner details.

Timeline for Filing:

Form 8: File it by 30th October every year.
Form 11: File it by 30th May every year.

These are standard deadlines, which must be met. In case of failure in meeting them, heavy penalties are imposed, which can be ₹100 per day of default with zero upper limit.

Penalty for Non-Compliance

Let’s talk about the penalty that can be levied if an LLP fails to comply:

A penalty ranging from ₹25,000 to ₹5 lakh under the LLP Act can be imposed.
Not the whole, but partners individually may be penalized, and its quantum would depend on the nature of the default.
In severe cases, especially where Form 8 or Form 11 filings are missing for two consecutive years, the LLP can be struck off by the RoC.
In many cases, entrepreneurs skip filing Form 8 or Form 11 for two consecutive years. The RoC can terminate its registration.

In order to keep these penalties at bay, understanding LLP audit applicability is necessary. Moreover, the norms must be followed religiously to avoid non-compliance. It also keeps an LLP active.

Benefits of Getting an LLP Audit

The LLP evaluation brings a lot of benefits. Here they are:

It builds credibility as lenders, investors, and vendors start trusting them for being compliant with acts and transparent about financials.
It establishes better internal control over financial status.
It spotlights errors in accounting before showing any severe consequences.
Helps the company to prepare funds for the future, mergers, or strategic partnerships.

Conclusion

Businesses must adapt to transparency, digital compliance, and stricter scrutiny to control their financial inflows and outflows. Not all LLPs are eligible for audits, as there are certain conditions defined in the Act to follow. If it is near or exceeding that limit of turnover, it becomes a necessity to hire a chartered accountant for audits.