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LLP Closure

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  • Overview
  • Rules and Regulations
  • Conditions
  • Reasons
  • Benefits
  • Documents
  • Procedure
  • Support
  • Fees
  • FAQs

What is LLP Closure?

The closure of a Limited Liability Partnership (LLP) is a formal process which is governed by the LLP Act, thus ensuring compliance with legal requirements. An LLP which is not engaged in business activities since its incorporation or has ceased operations for a duration of one year or more has the option to seek closure and request the removal of its name from the LLP Register by applying to the Registrar. Closing the LLP becomes preferable if it has become dormant, as closure is more favorable than following all compliance requirements or facing potential fines or penalties associated with its inactive status.

The process of closing a Limited Liability Partnership (LLP) involves several detailed steps and processes to ensure compliance with the LLP Act. Here is an overview of the closure procedure, including conditions, reasons, benefits, and required documents. Additionally, filing necessary documents with the relevant regulatory authorities is vital to formalize the dissolution process.

 

What is LLP Closure Rules and Regulations?

Closure of LLP is governed by the following rules and regulations: 

A: In case of declaring the LLP as Defunct
EForm 24 needs to be filed for striking off the name of LLP under clause (b) of sub rule 1 of Rule 37 of LLP Rules 2008. 

B: Winding up of LLP
The Sections 63, 64 and 65 of LLP Act 2008 cover the process for closing up of the LLP. In this process, all the assets of the business are disposed of to meet the liabilities of the same and surplus assets, if any, is distributed among the owners. For details one can refer the LLP Act, 2008 and “Limited Liability Partnership (Winding up and Dissolution) Rules, 2010”

 

What is LLP Closure Conditions?

An LLP can be closed under the following conditions:

  • It must have been inactive since formation or for at least one year.
  • The current account of LLP is closed.
  • Consent from all relevant parties, including creditors, authorities, and partners, has been obtained.
  • As of the date of application, it does not have any assets and liabilities.

 

What is Reasons for LLP Closure?

Several reasons may lead to the closure of an LLP, including:

  • The LLP has achieved its registered purpose.
  • The costs of maintaining an LLP exceed the expenses of dissolving it.
  • To avoid fines and penalties associated with late filing.
  • The LLP is unable to settle its bills or is on the brink of bankruptcy.
  • Failure to file annual returns for five consecutive financial years.
  • The LLP is incompatible with India's integrity, sovereignty, security of the state, or public order.
  • A court order mandating its closure.
  • Lack of interest from partners to continue the partnership.
  • Closure is desired due to the death of a partner.
  • Form 24 must be submitted to the Registrar of Companies (ROC) indicating the absence of debts and the LLP's ability to settle debts.

 

What is LLP Closure Benefits?

Closing a Limited Liability Partnership (LLP) by following due process is crucial for a smooth and legally compliant conclusion to the business’s operations. Closing an LLP offers various benefits, such as avoiding compliance costs and potential fines or penalties for inactivity. There various other direct and indirect benefits involved:

  • First of all, it is essential to settle all outstanding debts and obligations with creditors and stakeholders. This not only protects the reputation of the LLP but also shields the partners from personal liability of any kind. 
  • Closing an LLP in an organized manner ensures that assets are appropriately distributed among the partners, thus maintaining transparency in financial matters. Neglecting this process may lead to future disputes and legal issues.
  • Moreover, closing an LLP in accordance with legal procedures shows dedication to ethical business practices and can boost their credibility for future ventures. 
  • Closure of LLP also allows one to focus on new opportunities without being burdened by past obligations.

 

What is LLP Closure Documents?

To close an LLP, the following documents are necessary:
Application in e-Form 24:

  • Address proof of the LLP.
  • Aadhaar Card, PAN Card, and address proof of partners.
  • Consent letter signed by all partners.
  • NOC from the landlord (in case the registered office of LLP is rented).
  • Statement of accounts with NIL assets and NIL liabilities certified by a Chartered Accountant.
  • Copy of the acknowledgment of the latest ITR.
  • Copy of the initial LLP agreement and any subsequent changes.
  • An affidavit signed by designated partners stating the LLP's status.
  • NOC from creditors for strike-off.
  • Detailed application specifying reasons for closure.
  • Indemnity bond on non-judicial stamp paper.

 

What is LLP Closure Procedure?

A) Declaring Limited Liability Partnership as Defunct:

  • Application in e-Form 24 to the Registrar, accompanied by the LLP's income tax return.
  • Registrar's notice and request for representation.
  • Publication of notice/application on the Registrar's website.
  • Registrar may strike off the name if no reply is received.
  • Application to the Registrar to have the LLP declared defunct.
  • Submit an affidavit signed by designated partners confirming the LLP's cessation of commercial activity.
  • Provide a statement of accounts with NIL assets and liabilities, certified by a chartered accountant.
  • Similarly, Registrar also has the power to strike off any defunct LLP after his satisfaction of the need to strike off the LLP and he also has reasonable cause. However, in such a case, the registrar must send a notice to the LLP of his intention and request their representation within one month from the date of the notice. The Registrar should publish such notice or content of the application made by the LLP on its website for a period of one month for public information. In case no reply is received within the specified period, the registrar may strike off the name of LLP.

 

B) Winding Up of Limited Liability Partnership:

The LLP Act 2008 provides for the following two modes for closing the LLP. They are:

  • Voluntary Winding up : Under this, the partners may decide between themselves to stop and wound up the operations of the LLP.
  • Compulsory winding up : An limited liability partnership may be compulsorily wound up by the Tribunal under following circumstances:
  • If the LLP itself decides that it should be wound up by the Tribunal.
  • If for a duration of more than six months, the number of partners of the limited liability partnership is reduced below two.
  • If the LLP does not pay its debts.
  • If the LLP has defaulted in filing with the Registrar the Statements of Account and Solvency or annual return for any five consecutive financial years; or
  • If the Tribunal holds the opinion that it is just and equitable that the limited liability partnership be wound up.
  • Along with above mentioned steps certain other processes are required to be followed. These include:
  • Calling a board meeting, setting off liabilities, applying to the ROC, and surrendering PAN and TAN.
  • Pass a resolution with the consent of at least 3/4th of the total partners.
  • File the resolution with the Registrar on Form 1 within 30 days and provide a copy to the responsible individual.
  • Issue a notice of the resolution through a newspaper advertisement within 14 days.
  • Appoint an LLP liquidator with the approval of two-thirds of the partners.
  • The LLP liquidator files a report in Form 9 detailing the winding-up process, including accounts, property disposition, and liabilities discharge.
  • Both Partners and creditors should be in agreement of the dissolution.

 

What is LLP Closure Support?

ApkaTax provides expert assistance in closing an LLP. The process involves purchasing a support plan, adding queries, providing required documents, and completing all necessary actions under the guidance of Apka Tax experts. Closing an LLP is a comprehensive process which is governed by the LLP Act, requiring meticulous attention to detail to ensure legal compliance.

What is the LLP Closure Fees?

Are you looking for LLP Closure Fees then here the details for you. The LLP Closure cost start from ₹25000 to ₹60000 along with Government Fee ₹ Nil and Professional Fee ₹ Nil.

Steps

Fees
LLP Closure Fee ₹25000 To ₹60000
Govt Fees Nil
Professional Fees Nil

FAQs

To close an LLP (Limited Liability Partnership) in India, file Form 24 with the Registrar of Companies (ROC), declaring cessation of business operations and consent of partners. Liquidate assets, settle liabilities, and obtain a declaration of solvency. Finally, file Form 17 along with required documents to formally dissolve the LLP.
 

Limited Liability Partnerships (LLPs) can be closed by partners if the LLP has completed all pending compliance requirements, debts and liabilities are cleared, and partners unanimously agree to dissolve the LLP. Eligibility for closure includes LLPs with no ongoing business operations or liabilities, ensuring a smooth dissolution process.
 

Form 24 is a document required for closing a Limited Liability Partnership (LLP) in India. It is filed with the Registrar of Companies (ROC) to apply for the striking off or dissolution of the LLP. Form 24 includes details about the LLP's assets, liabilities, and consent from partners for closure.
 

The cost of closing a Limited Liability Partnership (LLP) in India typically involves various expenses such as professional fees for legal and accounting services, government fees for filing closure documents with the Registrar of Companies, and any outstanding liabilities settlement costs. The total cost can vary based on the complexity of the closure process.
 

Yes, it is necessary to close an LLP (Limited Liability Partnership) if it is no longer active or operational. Closure involves filing necessary forms with the Registrar of Companies (ROC) and settling all liabilities and obligations. Failure to close an LLP properly can lead to legal and financial repercussions.
 

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