Topic 18 Small LLP 2021 Amendment

Module Overview

The "Small LLP" is the most significant new concept introduced by the LLP (Amendment) Act, 2021. This topic provides a comprehensive analysis of the Small LLP definition under Section 2(1)(ta), its thresholds, the compliance and penalty benefits it carries, its relationship with the Small Company concept under the Companies Act, 2013, and its practical significance for small businesses in India.

Policy Background — Parallel with Companies Act

The Companies Act, 2013 introduced the "Small Company" category to provide reduced compliance to smaller companies. The 2021 Amendment created an analogous "Small LLP" category — a recognition that size-proportionate regulation is a legitimate policy objective.

The J.J. Irani Committee (2005) had specifically recommended that the LLP form should be accessible and appropriate for small enterprises. The Small LLP category is the fullest legislative implementation of that 2005 vision.

Section 2(1)(ta) — "Small LLP" (inserted by LLP Amendment Act, 2021)

"Small LLP" means an LLP whose contribution does not exceed twenty-five lakh rupees or such higher amount, not exceeding five crore rupees, as may be prescribed,

AND whose turnover for the immediately preceding financial year as per the Statement of Accounts and Solvency does not exceed forty lakh rupees or such higher amount, not exceeding fifty crore rupees, as may be prescribed.

≤ ₹25L

Contribution Threshold

₹5 Cr

Extendable to

≤ ₹40L

Turnover Threshold

₹50 Cr

Extendable to

Benefit Area

Regular LLP

Small LLP (Post-2021)

Penalty for non-filing of Form 11 (Annual Return)

Rs. 100/day; Max Rs. 1 lakh (LLP) + Rs. 50,000 (designated partners)

Reduced penalty — lower caps prescribed for Small LLPs

Penalty for non-filing of Form 8 (SoAS)

Rs. 100/day; Max Rs. 1 lakh (LLP) + Rs. 50,000 (designated partners)

Reduced penalty caps

ROC registration fees

Standard fee schedule

Reduced fee schedule for Small LLPs

Adjudication by Registrar

Full penalty under standard provisions

Proportionate penalty caps — recognised in adjudication process

Policy intent

Compliance for all sizes

Proportionate regulation — size-based flexibility

Feature

Small LLP (LLP Act, 2008 — amended 2021)

Small Company (Companies Act, 2013)

Governing provision

Section 2(1)(ta), LLP Act

Section 2(85), Companies Act, 2013

Contribution/Paid-up Capital threshold

≤ Rs. 25 lakhs (extendable to Rs. 5 crores)

Paid-up capital ≤ Rs. 4 crores (as amended)

Turnover threshold

≤ Rs. 40 lakhs (extendable to Rs. 50 crores)

Turnover ≤ Rs. 40 crores (as amended)

Both conditions required

Yes

Yes

Excluded categories

Not specified (all LLPs potentially eligible)

Holding company, subsidiary, section 8 company, company registered under any special Act

Benefits

Reduced penalties; lower ROC fees

Reduced penalties; reduced Board meeting requirement; abridged Annual Return; no Cash Flow Statement

AGM requirement

Not applicable to LLPs at all

Small companies have relaxed AGM and Board meeting requirements

Audit exemption

Not provided by LLP Act

Not provided (audit still mandatory for companies)

⚖ National Company Law Tribunal (General Principle) Post-2021 Amendment Cases

Held: Post-amendment, NCLT adjudication orders involving Small LLPs have demonstrated that the reduced penalty caps are applied in the determination of default penalties. The tribunals have consistently held that the Small LLP classification must be assessed based on the most recent financial year's figures — an LLP that has grown beyond the thresholds in the current year is no longer a Small LLP for that year's compliance purposes, even if it was one in the prior year.

Principle: Small LLP classification is assessed annually based on current year contribution and immediately preceding year turnover — it is not a permanent designation.

📌 EXAM TIP: Examination targets on Small LLP: (1) Both thresholds: Rs. 25 lakhs contribution AND Rs. 40 lakhs turnover; (2) "Extendable to" figures: Rs. 5 crores and Rs. 50 crores by prescription; (3) Both conditions must be met simultaneously — not OR, but AND; (4) Comparison with Small Company under Section 2(85) CA 2013 (paid-up capital ≤ Rs. 4 crores; turnover ≤ Rs. 40 crores); (5) The category was introduced by the 2021 Amendment — an LLP incorporated before 2022 can also qualify as a Small LLP if it meets the thresholds.

✔ PRACTICAL NOTE: A two-partner IT consulting LLP with total partner contributions of Rs. 5 lakhs and annual billings of Rs. 12 lakhs is a "Small LLP" — well within both thresholds. For this LLP, the compliance cost savings (reduced penalty caps, lower ROC fees) are significant relative to its size. This is exactly the small business that the J.J. Irani Committee envisioned when recommending a broadly accessible LLP framework in 2005.

Key Point

Core Content

Definition section

Section 2(1)(ta) — inserted by LLP Amendment Act, 2021

Contribution threshold

≤ Rs. 25 lakhs (extendable to Rs. 5 crores by prescription)

Turnover threshold

≤ Rs. 40 lakhs (extendable to Rs. 50 crores by prescription)

Both conditions

Must BOTH be satisfied — one alone is insufficient

Benefits

Reduced penalties; lower ROC fees; proportionate adjudication

Small Company comparison

CA 2013: paid-up capital ≤ Rs. 4 crores + turnover ≤ Rs. 40 crores

Policy origin

J.J. Irani Committee (2005) vision for small enterprise LLP

Annual reassessment

Small LLP status assessed each year — not permanent

Amendment year

LLP Amendment Act, 2021 (Act 51 of 2021) — in force April 1, 2022