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Closing an LLP


The simplest way to close a defunct Limited Liability Partnership (LLP) with no assets or liabilities is to strike out the name. The designated partners must first settle the LLP's finances by selling any assets and paying off any liabilities. The LLP will be closed by the Registrar as it has no assets or liabilities and no public complaints.
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Overview

A Limited Liability Partnership is defined as a partnership created and registered under the Limited Liability Partnership Act of 2008.

A limited liability partnership (LLP) can close it down in one of two ways:
  1. Declaring the LLP as Defunct
    If an LLP intends to close down its business or if it has not carried on any commercial operations for a year or longer, it can apply to the Registrar to have the LLP declared defunct and the name of the LLP removed from the register of LLPs.
    Under clause (b) of sub rule 1 of Rule 37 of the LLP Rules 2008, an E-Form 24 must be filed to have the name of the LLP struck off. Similarly, the Registrar has the authority to strike off any defunct LLP if he/she determines that it is necessary to do so and that he has fair reasons
  2. Winding up of LLP
    It is the process through which all of a LLP's assets are sold to cover its liabilities, with any surplus distributed to the partners. The LLP Act of 2008 specifies two options for winding up an LLP.
    • Winding up voluntarily: Under this arrangement, the LLP's operations can be halted and wound up by the partners themselves.
    • Winding up compulsorily: The Tribunal has the power to order the dissolution of a limited liability partnership.
      • if the limited liability partnership's number of partners is decreased to less than two for a period of more than six months.
      • if the limited liability partnership can't pay its debts
      • if the limited liability partnership has acted in a way that jeopardies India's sovereignty and integrity, state security, or public order.
      • if the limited liability partnership has failed to file its Statement of Account and Solvency or annual return with the Registrar for five consecutive financial years.



Benefits of Closing an LLP

Compliance free

There is no need of sticking on the track to stay compliant as the LLP would be dissolved anyway.

No Penalty

Once the closure is initiated there is no need of the LLP to be worried about being in a state to pay the penalty fee for the unaddressed causes.

Appropriate business

If the business is not generating profits, then the resources can be utilized for a better one.

All leases shall be cancelled

When a firm or entity has entered a lease for a specified period, it shall terminate all terms and conditions of the lease during the winding-up procedure. If a penalty is payable, it is taken from the sale of assets.

Checklist/Document Requirements

  1. Affidavit by all the Partners
  2. Authorization Letter
  3. Consent of all partner
  4. Declaration by all partner
  5. Indemnity bond by all partner
  6. Statement of accounts showing Nil assets and liabilities certified by Chartered Accountant
  7. A copy of acknowledgement of latest Income Tax Return
  8. Initial LLP Agreement along with all supplementary agreements, if any

Process of Closing an LLP

Step 1: Close the Bank Account of the LLP

Step 2: Sell the assets, if any

Step 3: Pay all the liabilities, if any

Step 4: Take the written consent of all partners for strike off

Step 5: Drafting of all the required documents for closure of LLP

Step 6: Filing of form 24 with the Registrar

Close an LLP

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Frequently Asked Questions


How to close a Defunct LLP?
A defunct LLP can be closed by filing an application with the Registrar for the LLP's name to be struck off the register with the permission of all of the LLP's partners.
Normally, it takes 6 to 12 months for the LLP's name to be removed from the registrar's records.
The LLP can be closed if it has been dormant for at least one year prior to the filing of the application or has been inactive since the date of incorporation.
Yes. To file an application for the closure of an LLP, all of the partners must agree.
The Registrar will approve the application form when it has been reviewed. The LLP's status will be changed to "in the process of being struck off.” Subject to approval and public advertisement, the LLP shall be marked as stuck off.
According to the LLP Amendment Rules of 2017, income tax returns must be filed up to the end of the financial year in which the LLP ceased to do business or operate. If an LLP has not started doing business since its formation, no IT return is necessary, and the LLP can file for strike off directly.