Overview on Closing a Limited Liability Partnership
The LLP (Limited Liability Partnership) which is not leading on any business plan since incorporation or terminates to carry on the profession for one year or more can apply for its closure including ROC to strike off the name of the LLP. Any LLP can close down its business by adopting any of the following two ways, which are as follows:-
A) Declaring Limited Liability Partnership as Defunct
In case the LLP desires to close down its trade or where it is not carrying on any business activities for the period of 1 year or more, it can make a submission to the Registrar for declaring the entity- LLP as defunct & eliminating the name of the LLP from its register of LLP’s in India.
The e-Form 24 is requisite to be filed for striking-off the name of LLP under clause (b) of sub-rule 1 of Rule-37 of LLP, Rules 2008. Correspondingly, Registrar also has the said power to strike off any defunct LLP -satisfying himself of the need to strike-off and has rational cause. Nevertheless, registrar has to send a notice to the LLPs of his intention in this case, and request to send their representation within 1 month from the date of notice.
The Registrar will publish such notice/content of the application on its website made by the LLP for a period of 1 month for the information of the general-public. Registrar may strike off the name of LLP if no reply is received within the cited period.
B) Winding up of Limited Liability Partnership
Section 63, Section 64 and Section 65 of LLP Act 2008 governs the process for winding up of the LLP in India. It is the process where all the assets of the business are predisposed off to meet up the liabilities of the same and if there is excess any, gets dispersed among the owners. The LLP Act, 2008 provides for subsequent 2 modes for winding up the LLP i.e.:
Voluntary Winding up
Under this, the partners may between themselves make a decision to stop & wound up the operations of the LLP.
Compulsory winding up
A LLP may be mandatorily wound up by the Tribunal,—
- If the LLP decides that limited liability partnership be wound up by the Tribunal;-
- If, for a period of more than six months, the number of partners of the LLP is reduced below two;
- If the LLP is unable to pay its debts;
- If the LLP has acted against the interests of the sovereignty and integrity of India, the security of the State or public order;
- If the LLP has made a default in filing with the Registrar the Statement of Account & Solvency or annual return for any five consecutive financial years; or
- If the Tribunal is of the opinion that it is just and equitable that the LLP be wound up.
Note:- For details, refer LLP Act, 2008 and “Limited Liability Partnership (Winding up and Dissolution) Rules, 2010”
Closing of LLP
What are the Benefits of Closing an LLP?
What are the Essential Documents Required to Close an LLP?
An application is required to be made in e-Form 24 to strike off the name of the LLP, with following below mentioned documents:-
- Address Proof of firm have to be submitted. Also, NOC from landlord will be submitted. (If the registered office place is rented, rent agreement & one utility bill (water bill, electricity bill, property tax bill, gas receipt etc.)
- A statement of account revealing NIL assets & NIL liabilities, made up to a date not earlier than thirty days of the date of filing of Form 24 certified by a Chartered Accountant in practice.
- Copy of acknowledgement of latest ITR- Self Explanatory
- Copy of the initial LLP agreement, along with changes thereof if entered into and not filed,
- An affidavit signed by the designated partners of LLP, either jointly/severally, to the effect:-
1. That the Limited Liability Partnership has not commenced business or where it commenced business, it ceased to carry on such business from ………….(dd/mm/yyyy);
2. That the limited liability partnership has no liabilities and indemnifying any liability that may arise even after striking off its name from the Register;
3. That the Limited Liability Partnership has not opened any Bank Account and where it had opened, the said bank account has since been closed together with certificate(s) or statement from the respective bank demonstrating closure of Bank Account;
4. That the LLP has not filed any Income-tax return where it has not carried on any business since its incorporation, if applicable.
- NOC from Creditors:- NoC for strike-off to be obtained from secured creditors & Partners, if any
- Copy of Detailed Application- Mention full details of LLP plus reasons for closure
- Copy of Authority to Make the Application- Duly signed by all the Partners
- Indemnity Bond:-
1. The application in the Form as may be prescribed must be accompanied with an Indemnity Bond given by each designated partner of applicant LLP separately, duly notarized to the effect that should there be any liabilities on the LLP, such liabilities will be met in full by the designated partners of the applicant LLP even after the name of the LLP is struck off the register of the companies and will be liable jointly as well as severally.
2. Indemnity Bond is required to be given on the Non Judicial Stamp Paper of adequate value as applicable in the State where the Registered Office of the LLP is situated. Therefore, the text of the Indemnity Bond should be typed on the Non-Judicial Stamp Paper and then should be executed before the Public Notary
Before the introduction of the LLP (Amendment) Rules, 2017, the procedure for winding up an LLP used to be extended and burdensome. On the other hand, with the introduction of LLP E-Form 24, the procedure has been made simple and easy. Hence, it’s best for Entrepreneurs having dormant or defaulting LLPs that are accruing penalty to use this opportunity to close the LLP.
What is the Procedure to Close Limited Liability Partnership?
In case the LLP wants to close down its business or where it is not carrying on any business operations for the period of one year or more, it can make an application to the Registrar of Companies for declaring the company as defunct and removing the name of the LLP from its register of LLP’s.
- Step – 1 – Calling a Board Meeting
LLP will call a Meeting of Partners/Designated Partners for the purpose of Strike off of LLP to pass a resolution and to authorize any Designated Partner of the LLP to file application with ROC.
- Step – 2 – Setting Off Liabilities
If there are any liabilities in the LLP, it will set off all the liabilities before next step after passing of resolution.
- Step – 3 – Application to ROC
For Striking off the name of the LLP under Rule 37(1)(b) & 37(1A) of LLP Rules, an application is needed to be made in e-Form 24 to the Registrar of Companies with below- mentioned particulars and attachments:
Board Meeting of Partners for Closure of LLP
Resolution for Closure of LLP ought to be approved by at least 34 of Partners
Application is in e-Form 24 to the ROC for Striking off the name of the LLP with the consent of Partners (Under Clause (b) of sub rule 1 of Rule 37 of LLP Rules 2008)
· Stopped Business operation for 1 year or more
· Complied with Annual Compliance for the period up to its operations.
· Get consent of Partners
· Closure of Bank account
· Get consent of Creditors, if any
· Statement of Assets and Liability shall be prepared certified by chartered accountant
· Authorization of Application by any of the designated Partners.
· Statement of undertakings or indemnity Bond
· Acknowledgement of Latest Income tax return
Documents Needed with E-Form 24
· An affidavit signed by the partner/ designated partners [according to the format has given sub-clause (b) of clause (II) of sub-rule (1A) to rule 37)];
· Copy of the indemnity bond for striking off name Indemnity bond / undertaking
· Copy of authority to create the application duly signed by all the partners;
· Copy of acknowledgment of latest ITR.
· Consent of all the partners and creditors.
· Statements of accounts revealing nil assets & nil liabilities
· Application disclosing the reasons for strike off and the operative status of the Company.
· PAN of LLP
· Closure Statement of Bank Account
Documents from Partners & Designated Partners
· PAN of Partners of LLP
· Aadhaar of Partners of LLP
· Latest Address Proof of Partners of LLP
- Step – 4 – Surrender PAN of LLP
Surrender the PAN & TAN of the LLP, once Certificate of striking off of the LLP is received from ROC.
CorpBiz Procedure for Closure of LLP
Kindly utilize the steps given above to integrate legally and securely a Closure of LLP. Our CorpBiz experts will be at your disposal for assisting you with guidance concerning Closure of LLP and its compliance. CorpBiz professionals will assist you in planning seamlessly at the least cost, confirming the successful conclusion of the process.
It is advisable that an attorney with “Corporate experience” must be appointed to overwhelm many of the potential pitfalls that creep around within Closure of LLP and to understand the requirement in detail. The elementary information would be mandatory from your end to start the process. The Attorney will begin working on your request once all the information is provided, and the payment is received.
CorpBiz is one of the platforms which coordinate to fulfil all your legal and financial requirements and connect you to consistent professionals. Yes, our clients are pleased with our legal service! Because of our focus on simplifying legal requirements, they have consistently regarded us highly and providing regular updates.
Our clients can also track at all times the progress on our platform. If you have any questions about the process of Closure of LLP, our experienced representatives are just a phone call away. CorpBiz will ensure that your communication with professionals is charming and seamless.
Frequently Asked Questions
A 'Limited Liability Partnership', i.e. LLP, is a partnership under which some or all the associates have limited liability.
When the LLP is inoperative from the date of incorporation or inactive for at least one year, and when LLP does not have any assets/liabilities as on the date of application.
In matters where the LLP wants to close down its business or where it is not carrying on any business operations for one year or more, the title of LLP can be struck off by the register or by the LLP in 'e-Form 24' with the consent of all partners.
E-Form 24 is used for producing an application to the Registrar of Companies for striking off the name of the LLP
The LLP must have a PAN, should be inactive for at least one year or non-operational from the time of incorporation, no live bank account at the time of application, and should have filed the latest IT returns.
The designated partners have to sign the application along with the consent of all partners.
Minimum one year has crossed after incorporation of the LLP for making an application for striking off the name of the LLP.
If LLP started operation and closed in between, all returns shall be filed until the date of service of the LLP.
In case business is originated and stopped in between, LLP shall file all Income tax returns till the date of administration. LLPs did not begin service can file closure application without filing returns.
No, once closure request is filed no need to submit any returns