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LIMITED LIABILITY PARTNERSHIP CLOSURE OF YOUR LLP
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OVERVIEW
CLOSE THE LLP
The Limited Liability Partnership (LLP) may request closure from the Registrar and remove its name from the Register of LLPs if it has not been operating since incorporation or has stopped operating for a period of one year or more. The LLP should be closed if it has become inactive rather than complying with all requirements and paying a fine or penalty.
CONDITIONS
CONDITIONS FOR TERMINATING A LIMITED LIABILITY PARTNERSHIP:
- It has been inactive for at least a year or from the day of incorporation.
- It has no assets or liabilities to date.
- The LLP's active account has been closed.
- All parties, including a creditor, authority, or partner, have consented.
- The LLP is now bankrupt.
- The court has mandated the closure of LLP.
- The LLP's partners have no interest in maintaining their partnership.
- If the remaining partner wishes to dissolve the LLP following the death of another partner or partners.
BENEFITS
BENEFITS OF CLOSING AN LLP
DOCUMENTS REQUIRED
DOCUMENTS REQUIRED TO CLOSE AN LLP
An application in e-Form 24 must be submitted with the information listed below to remove the LLP name.
- If the registered office is rented, the rental agreement and a utility statement (such as an electricity bill, property tax bill, water bill, gas receipt, etc.) are required for address proof.
- A statement of accounts that is certified by an active Chartered Accountant shows NIL assets and liabilities up to a date that is not earlier than 30 days after the date Form 24 was filed.
- Self-attested copy of the most recent ITR's acknowledgement.
- A copy of the initial LLP agreement and any amendments that were made but still need to be submitted.
- An affidavit that the designated partners of the LLP have jointly or separately signed states the following:
- The court has mandated the closure of LLP.
- The LLP's partners have no interest in maintaining their partnership.
- If the remaining partner wishes to dissolve the LLP following the death of another partner or partners.
- That the Limited Liability Partnership has either not started doing business or, if it has, it has stopped doing business.
- Even after removing its name from the Register, the Limited Liability Partnership is indemnified against any potential liabilities.
- The Limited Liability Partnership has not opened any bank accounts. In cases where it has, the accounts have been closed along with certificate(s) or a statement from the relevant bank attesting to the closure of the accounts.
- The LLP has not filed any income-tax returns, if applicable, in cases where it has not operated a business since its incorporation.
- NOC from Creditors: A NOC for strike-off must be acquired from secured creditors and partners, if any, together with a copy of the detailed application.
- Copy of the letter of authorization- Properly executed by each partner.
- Bond of Indemnity:
- A notarized indemnity bond from each designated partner stating that the obligations will be met with the application in the form that may be specified even after the LLP’s name is removed.
- The Non-Judicial Stamp Paper of sufficient value, as permitted in the State where the Registered Office of the LLP is located, should be used to provide the indemnity bond.
- Consequently, the Indemnity Bond’s text should be typed on the non-judicial stamp paper before being signed before a public notary.
- The LLP (Amendment) Rules were introduced in 2017, and they streamline and simplify the lengthy and arduous process of winding up an LLP. On the other side, the process has been made simple and easy with the introduction of LLP E-Form 24.
PROCEDURE
PROCEDURE TO CLOSE LIMITED LIABILITY PARTNERSHIP
The LLP can ask the Registrar to declare it defunct and remove its name from the Register if it wants to close its doors or has not conducted any business activity for at least a year.
Any LLP may choose to end operations in one of the two ways listed below:
A) Terminating a Limited Liability Partnership
The LLP may submit an application to the Registrar for the declaration of the entity- LLP as defunct and the removal of the name of the LLP from the Register of LLPs in India if it wishes to stop its business or if it has not conducted any business activities for one year or more.
In accordance with clause (b) of sub-rule 1 of Rule-37 of the LLP, Rules 2008, the e-Form 24 must be submitted to have the name of the LLP removed. Additionally, if the Registrar determines that a defunct LLP must be struck off and has a good reason, they may do so by exercising power as mentioned above. However, the Registrar must notify the LLP of his plans and then ask them to submit a response within a month of receiving the notice.
For the general public’s knowledge, the Registrar will post the notice or application’s content on its website for a month. If no response is made within the specified time, the Registrar will remove the name of the LLP.
B) Limited Liability Partnership Dissolution
The procedure for winding up the LLP in India is governed by Sections 63, 64, and 65 of the LLP Act 2008. It is a process in which all of a company’s assets are distributed among the shareholders if there is any excess after all liabilities have been met. According to the LLP Act of 2008, there are two ways to dissolve an LLP:
1) Winding Up voluntarily
According to this, the LLP’s operations may be stopped and wound up at the partners’ own discretion.
2) Mandatory Winding Down
An LLP can be mandatorily winded up by the Tribunal –
- If the LLP’s partner count falls to two or below for a period of time longer than six months.
- LLP cannot afford to pay its debts.
- If the LLP operated in a manner that was detrimental to India’s sovereignty and integrity, the State’s security, or the maintenance of public order.
- If the LLP has failed to file a Statement of Account & Solvency or annual return with the Registrar for any five consecutive financial years; or when the Tribunal believes that the LLP should be wound up.
FAQS
FAQS
A defunct LLP is one that has no assets or liabilities and has not begun or been operating a business in the most recent calendar year.
A defunct LLP may be closed by submitting an application to the Registrar for the name to be removed from the Register with the approval of all of the LLP's partners.
To request that the name of the LLP be removed from the Register of companies.
Yes. The application for closure must have the approval of all partners.
No. A certificate for the closing of the LLP will not be issued by the Registrar. The Registrar will approve the application form following a review. The LLP will now have the status "under the process of striking off."
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