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Closure of LLP or Limited Liability Partnership
Do you want to close a LLP ? It is necessary to file Closure of LLP with the ROC as the ROC or MCA database needs to be updated and the LLP is free form. The Limited Liability Partnership Closure application needs to be filed for Closing.
An LLP or Limited Liability Partnership is needed to file certain mandatory annual returns whether the business operates or not. If the firm fails to file the due returns, then the LLP will be subjected to penalties and prosecution as per the LLP Act and the designated directors or partners of the LLP are liable to face the same penalties and prosecution. Stopping of business operations cannot be a reason for not filing the annual returns; an LLP continues in existence until its formal closure of the llp process is done. An LLP or Limited Liability Partnership being a separate legal company or business registered as per the law, it is mandatory to be closed in a formal way as specified in the LLP Act.
An LLP or Limited Liability Partnership fulfilling the following factors can file an application for closing of llp or striking off its registered firm name from the Register of LLP.
- LLP should be not working from the date of incorporation or registering or inactive for a time period of one year at least
- LLP should not own any assets or properties or liabilities as on date of application.
The application for Closure or striking off the firm name should be filed along with the specified fee payment, consent of all partners of the firm, affidavits and indemnity by all designated directors or partners, copy of the latest income tax return and the latest statement of bank accounts of the firm from the date of application attested by a Chartered Accountant.
A defunct Limited Liability Partnership or LLP can make a llp closing procedure to the Registrar with the acceptance from all partners of the firm and to strike out its name from the register.
A defunct Limited Liability Partnership or LLP refers to a firm or LLP which has never started its business operations or not carried any business activities for the immediate past one year and the firm has no assets, properties and liabilities.
Qualification: Criteria for the Legal Closure of LLP
- The LLP or Limited Liability Partnership firm is not operating its business activities since the establishment or at least for one year or longer.
- Indexed detained returns in Form 8 and Formed 11 up to the end of the financial year in which the LLP terminated to work on its affairs or business matters.
- Has not fixed any bank account since closed with a credential or certificate.
- LLP has no obligation or debt due or payment due to any creditors or lenders.
- Income Tax Returns for the immediate financial year are filed.
Documents required for Limited Liability Partnership
- PAN of Limited Liability Partnership
- Agreement by Partners of Limited Liability Partnership
- Latest IT Return (if any)
- Statement / Certificate for the closure of Bank Account.
- Latest statement or report of Accounts of Limited Liability Partnership
Documents from Partners & Designated Partners
- PAN of Partners of the LLP
- Aadhaar number or card of Partners
- Address Proof of Partners of the LLP closure form
The Detailed Procedure: Winding up of the LLP
As per the law, a formal process is required for dissolution or winding up of registered entities like LLP.
Types of LLP Winding up process
The winding-up of a Limited Liability Partnership may be completed in the following ways:
Declaring LLP as Defunct
Winding up of LLP
Voluntary Winding-up of LLP
As per this process, the directors or partners have decided to stop and wind up the business operations and close an LLP.
To start this process, the resolution should be passed by 3/4th of the total number of members or partners of the entity. A copy of Resolution has to be submitted with the Registrar in Form 1 within the time period of 30 days of approving the Resolution and a copy of such authorisation report has to be given to the authority who is appointed to take care of the wind-up process of the LLP.
Compulsory Winding-up of LLP
The compulsory winding of LLP up is a process by which the judicature orders for the winding up and dissolution of LLP for the mentioned below reasons:
- if an LLP decides that it should be wind up by the Tribunal;
- if the number of partners of the firm is reduced to 1 or below 2 for a period of six months or more
- if a Limited Liability Partnership is unable to repay its loans and debts;
- if a Limited Liability Partnership has acted against the rules of the reign and integrity of India, the security of the public order or state;
- if a Limited Liability Partnership has made a default in submitting with the Registrar the report or Statement of Account and Solvency or annual return for any five back-to-back financial years; or
- if a Tribunal is the best option that it is equitable and just that the Limited Liability Partnership be wound up.
Winding up with Creditors
Majority of partners of the firm need to make official authorization in Form-2 stating that they have no loans or debt unpaid or they will repay their loans and debts within the prescribed time period and not exceeding a year from the date of filing the resolution for the purpose of winding up.
Publication of Resolution for winding up of the LLP: Within a time period of 14 days of filling the Resolution for winding up of LLP and receiving the consent from the investors or creditors, LLP closure documents should publish an advertisement mentioning about the resolution of winding up in a newspaper in the location or place where the registered office or principal place of LLP is situated.
The Winding-up or Dissolution process of the LLP
The winding-up or dissolution process of the LLP is divided into 3 parts:-
and affidavits
The first step in this winding-up process is the voluntary dissolution that is passing a resolution of partners of the firm and creditors. After this resolution, all of the partners of the firm shall sign an affidavit, bond accompanied with other essential documents and to submit the form for striking off the name of the LLP with MCA.
Appointment of Liquidator and Liquidation report
This process is not applicable for llp closure process. A Liquidator is a concerned authority appointed by the LLP within the time period of 30 days of passing the resolution after the consultation with the investors or creditors if any. The liquidator will conduct all the necessary operations and duties to generate a liquidation report of the firm that affects the dissolution as it contains the exact format in which the winding-up process would be done. This report will be submitted to the registrar with the resolution of credence of the liquidation and valuation report.
Dissolution by Tribunal
Along with the summary and report mentioned above, an application form will proceed to the tribunal for dissolution. If the tribunal is gratified with the procedure followed for the winding-up process, then it will issue the necessary order through which LLP shall stand wound-up or dissolved. Then, the liquidator will submit such an order with the registrar.
Finally, if the registrar thinks all fit, a notice will be published stating that winding up/strike off of an LLP as dissolution of the LLP in its Official Gazette. If the notice did not receive any objection within a time period of 30 days then the registrar will dissolve or wind up or strike off an LLP.
Frequently Asked Questions
When the Limited Liability Partnership is inactive or inoperative from the date of registration or incorporation for about one year, and when Limited Liability Partnership does not have any assets or properties or liabilities as on the date of practical application.
In case the Limited Liability Partnership wants to close down its operations or it is not having any business activities for at least one year or more. The title of Limited Liability Partnership can be struck off by the register using ‘e-Form 24’ with the approval of all partners.
The Limited Liability Partnership must have a PAN and should be inactive or non-operational for at least one year from the time of incorporation. There should not be a live bank account at the time of incorporation. The LLP should have submitted the latest IT returns.
Minimum of one year should be crossed after getting incorporation of the LLP for filing an application for striking off the LLP name.
