For most of the sectors, the foreign direct investment (FDI) is allowed in the company as well as LLP in India, under automatic route of approval. When we say the automatic route of FDI, it means that the investment in the equity share capital of the company or as a contribution to an LLP is made without seeking any prior approval, however, after the incorporation of the company the share capital is to be remitted in the Bank Account of the company or LLP from the foreign bank of the investor/shareholder. After the remittance is made the Indian company or LLP has to file Form FC-GPR to the RBI through AD Banker. On the contrary, if the investment is not available through the automatic route then before the incorporation of the company or LLP, prior approval is required from the Central Government.
There is no difference in reporting requirement, whether the investee entity is a company or LLP. After incorporation of the company or LLP, the capital amount should be paid by the investor by way of inward remittance through banking channels or out of funds held in NRE or FCNR(B) account maintained in accordance with the Foreign Exchange Management (Deposit) Regulations, 2016.
Note on Business Activity of Company or LLP
A company or LLP can be incorporated for only one industrial classification. This is also relevant from the technical point of view as in the application form for registration of a company or LLP, the applicant can choose only one industrial activity. In the circumstances, we advise you to go through the Industrial Category and select the most relevant for your case. Further, you should draft your MOA and AOA according to the Industrial Activity Selected by you. below is the link of the Main Industrial Classification for a company or LLP
From the compliance point of view, the LLP and company both have to comply with the following compliances in a similar manner
Accounting & Tax
- Maintain Books of Account
- Deduct TDS/Withholding tax from eligible payments
- Pay deducted TDS on 7th of Next month in Challan Number 281 to the income tax department
- Pay advance tax on its due dates four times in a financial year
- Raise tax invoices with correct rates of GST
- Pay GST and File form GSTR-3B every month
- File Monthly or Quarterly GSTR-1 Return as per its applicability
- Prepare and file annual GST Returns
- Prepare Balance Sheet and Profit & Loss A/c
- File Income Tax Return
Annual Compliance in Case of Company
- Statutory audit of the books of account
- Prepare directors report and circulate to all the shareholders of the company along with a notice for calling of annual general meeting (AGM)
- Held the AGM within its due date
- Transact following business in the legally held AGM of the company
- To present the financial statement along with audit report for adoption by the shareholders of the company and also to inform the shareholders about the key decisions taken by the management during the period beginning the last AGM to the current AGM,
- To seek the consent of the shareholders for appointment or reappointment of the statutory auditor of the company for the period after the AGM and until the conclusion of the next AGM
- To seek approval of the shareholders on the appointment of directors on rotation, and
- To seek approval of the shareholders on the declaration of a dividend to the shareholders on the recommendations of the directors of the company.
- After the conclusion of the AGM, the company has to file following annual returns to the registrar of companies within its due date with the prescribed filing fee.
- Form ADT-1: This is an intimation regarding the appointment of the auditor of the company within 15 days of the conclusion of AGM
- Form AOC-4: This is an annual financial report of the company, wherein the financial data of the company is filed with the ROC within 30 days of the conclusion of the AGM.
- Form MGT-7: This is an annual return to the ROC which needs to be filed within 60 days of the AGM
- Form MGT-8: This is a report from the company secretary. this is applicable to select kind of companies only.
- The company with foreign investment has to file a statement of foreign assets and liabilities to the RBI before 31st July every year for the previous year.
Annual Compliance in Case of an LLP
An LLP is required to get their books of account audited only when the turnover during the previous year has reached INR 40,00,000 or the capital of the LLP is INR 25,00,000. In all other cases, the statutory audit is not required. apart from the statutory audit, the LLP following are the returns which have to be filed before the ROC
- Form 11: This is the annual return of the LLP to be filed before 30th May for the year ended on 31st March of the year.
- Form 8: This is the report of the financial statement to be filed before the ROC before 30th October.
Other Common Compliances
As a business, the company or LLP has to comply with various state-specific legislation and to the regulations issued by various departments and municipality. following is an indicative list
- Shops and Establishment Registration
- Professional Tax Registration and Payment
- Trade or Storage License
- Factory License
- Provident Fund and ESIC etc,
From above you would have noted that the setup and compliance-related requirements are almost similar to both the entities, however, in case of the LLP the statutory audit is not required if the turnover is less than 40 Lakh or the capital is less than 25 Lakh.