Centre to cut 50% fines for startups created as LLPs

The ministry of corporate affairs will notify the requirements for startup LLPs to avail of this relief.

The government is set to announce a 50% cut in penalties for nearly a dozen offences by startups incorporated as limited liability partnerships (LLPs), an official aware of the development said.

An email sent to the secretary in the ministry and to the spokesperson remained unanswered till the time of going to press.

The offences include non-compliance relating to requirements of filing statutory documents and returns, appointing a designated partner responsible for all compliances and having at least one resident partner for the LLP, the official cited above said on condition of anonymity.

The ministry of corporate affairs will notify the requirements for startup LLPs to avail of this relief. One of them is that the startup needs to be recognized as one by the department for promotion and internal trade (DPIIT), the person mentioned above said.

“This relief is expected to encourage small unincorporated businesses to adopt LLP form and become part of the formal economy,” the official said.

An email sent to the secretary in the ministry and to the spokesperson remained unanswered till the time of going to press. The reduced penalty is available to the entity and the partners, including the designated partner and other persons liable to pay the penalty.

Since these are procedural and technical lapses and do not show any intent to defraud the public, an in-house administrative system will be available to settle them. DPIIT defines a startup as a business with less than ₹100 crore sales, which should be working towards innovation and improvement of services and should have the potential to generate jobs.

The amendment to the LLP Act passed by Parliament in the recently concluded monsoon session decriminalized offences that are procedural in nature as part of efforts to improve the ease of doing business.