Closing a Limited Liability Partnership

llp introduction

Introduction

When a Limited Liability Partnership wants to close its business or case it is not carrying on its business for a period of one year or longer; then it can apply for removal of its name to the Registrar. This is the “Fast Track Exit” method of striking off the name of the LLP from the Registrar of LLP’s.

Overview

The Limited Liability Partnership (LLP), which is not carrying on its business since its incorporation or which has terminated/stopped carrying on its business for a period of one year or more, can apply to the Registrar for its closure and also for removal of its name from the Register of the LLPs. If the LLP has turned dormant, then it is better to close it than fulfilling all the compliances, and it is also better to close than pay a fine or penalty in case the LLP is inactive.

Closing LLP
  • It is not active since the date of its incorporation or have ceased commercial activity for at least one year
  • It does not have any asset/liability on the date of application
  • The current account of LLP has been closed.
  • Consent of all the parties, such as a creditor, authority or partner, has been obtained. 
  • When the LLP is registered for a specific purpose, and the purpose is complete.
  • The LLP has become insolvent.
  • When the LLP is not active for at least one year.
  • The court has ordered the closing of LLP.
  • The partners of the LLP are not interested in continuing the partnership.
  • If, after the death of another partner/partners, the one who is alive wants to close the LLP.
REASONS FOR CLOSING LLP
  • There is no requirement to adhere to the conformities of law as the LLP would dissolve.
  • If your chosen business is not making profits, resources can be used better.
  • After the closure process commences, there is no sort of worry about paying any penalty fee for unexamined causes.
  • The distinction between the general and limited partnership is eliminated by closing the LLP
benefits
  • Call a meeting of the Designated Partners of the LLP to strike off the LLP
  • Close the Bank Account of the LLP
  • Surrender GST Registrations, if any
  • Sell the assets, if any and pay off the liabilities, if any
  • Take the written consent of all partners for strike off
  • Drafting of all the requisite documents for closure of LLP
  • Filing of form 24 along with required documents with the Registrar

Once, the E-form 24 is filled by the LLP to concerned jurisdictional Registrar, it has to wait for approval from the Registrar as to whether all documents attached in forms are proper or not. Registrar may ask for any additional documents for his satisfaction. Once, Registrar is satisfied, he shall send name of the LLP for publication in official gazette asking to raise objections from general public. If no objection is received, Registrar will strike off the name of LLP from its register.

Winding Up of LLP under the LLP Act, 2008

Section 63, Section 64 and Section 65 of LLP Act 2008 govern the process for winding up the LLP in India. It is the process where all the business assets are pre-disposed to meet up the liabilities of the same, and if there is excess, it gets dispersed among the owners. The LLP Act, 2008 provides for subsequent two modes for winding up the LLP, i.e.:

1.Voluntary Winding Up

Under this, the partners may themselves make a decision with 3/4th majority to stop &wind up the operations of the LLP.

2.Compulsory Winding Up by the Tribunal

An LLP may be mandatorily wound up by the Tribunal —

    • If the LLP decides that the 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 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
    • When the Tribunal is of the opinion that the LLP be wound up.

Winding up under IBC, 2016

Though this code provides steps for restructuring and revival of Corporate Debtor (LLP) yet under certain circumstances NCLT can pass an order for liquidation of LLP

winding up of an llc

How Shutbiz Assit You

Requirement Analysis

3600 Analysis of the requirements of the Company

Domain Experts

Assignment of Professionals who are Domain Experts according to the special requirements of the Company

Documentation

Preparation and execution of Requisite Documents

Timely Completion

Completion of process in a structured manner

Post-closure guidance

Assist in Post-closure Compliances

Frequently Asked Questions

Yes, an LLP can be closed even if there are pending legal disputes or lawsuits. The LLP may need to address the legal disputes and settle any outstanding matters before proceeding with the dissolution process.

In general, once an LLP is closed and the necessary steps are followed for its dissolution, the partners are not personally liable for the debts and obligations of the LLP that arise after the dissolution.

Yes, in many jurisdictions, an LLP can be converted into another business structure instead of closing it. Common conversion options include converting the LLP into a private limited company or a general partnership. The conversion process typically involves meeting certain legal requirements, such as filing appropriate documents and obtaining the necessary approvals.

Typically, the LLP’s assets are liquidated, and the proceeds are used to settle any outstanding debts and liabilities. If there are insufficient assets to cover the debts, partners may be required to contribute additional funds based on their agreed-upon liability.

As per LLP Amendment Rules, 2017, annual filing forms like form 8 and 11 is required to be filled up to the date of financial year in which LLP ceased to carry on business or operation.

As per LLP Amendment Rules, 2017, initial agreement is not filled and LLP is inoperative since incorporation then application for strike off is allowed if LLP Agreement is filled at the time of strike off but if LLP has commenced business and LLP Agreement is not filled then LLP must file LLP Agreement in form 3 before filing application for strike off.

As per LLP Amendment Rules, 2017, Income tax return is required to be filled up to the date of financial year in which LLP ceased to carry on its business or operation. If LLP is not commenced business since incorporation then filing of IT return is not required and LLP can directly apply for strike off.

Need Assistance for Company Closure

Closing a business can be a challenging endeavour, but with ShutBiz.com by your side, you can navigate the process smoothly and efficiently. Trust our expertise, experience, and commitment to deliver a seamless closure in compliance with Indian laws. Contact us today and let us help you close your business on the right note.

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