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Closure of LLP
Limited Liability Partnership (LLP) can be closed by following simple process of Striking off the name of defunct LLP having no business or commercial activities since last 1 year. The pre-condition to use this strike off method of closing is that the LLP must have no assets and no liabilities before strike off application. Designated partners are need to first settle the accounts of LLP by selling the assets, if any and pay off the liabilities.
The LLP closure process needs to be followed properly to officially wind up a partnership business and set all its partners free from the burden of filing annual returns and compliances. Even if the LLP is in inactive or defunct mode, its partners are still liable to follow compliance requirements; failing to which may result in penalties, or legal actions.
Step by step procedure to close an LLP
The step by step procedure to close an LLP is given as follows:
- Step 1: Pass a special resolution in the meeting where partners should give their consent for closure of the LLP
- Step 2: File form 1 along with the resolution within thirty days of filing the special resolution to the MCA
- Step 3: At least two partners of the LLP shall declare that either they do not have any debt or they will settle the amount of debt within one year
- Step 4: File Form 4 along with a report showing the value of all assets of the LLP. A declaration shall also be filed that the LLP is not being closed with the intent to defraud anyone.
- Step 5: Take consent of all or at least two-thirds of the creditors regarding the closure of LLP
- Step 6: Appoint a liquidator and obtain his or her statement which needs to filed to MCA in form 6 within 14 days of the receipt of consent from creditors.
- Step 7: Finalise the books of account of the LLP and submit them to MCA in Form 9.
- Step 8: File the application of close of LLP in Form 24 to the Registrar along with the documents prescribed in the act.
- Step 9: After this, the Registrar will publish the content of the application, through a notice, on the website, for a period of one month.
- Step 10: Then within one month, the registrar will remove the name of LLP from the register. A notice will also be published in Official Gazette to legally close the LLP.
Documents Required to Close the LLP
- A statement of account disclosing nil assets and liabilities, certified by a chartered accountant in practice made up to a date not earlier than thirty days of the date of filing of form 24
- An affidavit signed by the designated partners, either jointly or severally, to the effect of –
- That the LLP has not commenced business or where it is commenced, it ceased to carry on such business from……. (dd/mm/yyyy)
- That the LLP has no liabilities and indemnifying any liability that may arise even after striking off its name from the register
- That the LLP has not opened any bank account and where it had opened, the said bank account has since been closed together with certificates or statements from the respective bank demonstrating closure of bank account
- That the LLP has not filed any Income Tax Return where it has not carried on any business since its incorporation, if applicable.
- Copy of acknowledgment of the latest income tax return filed under the Income Tax Act, 1961, where the LLP has carried out any business and has filed such return
- Copy of the initial LLP agreement, if entered into and not filed, along with changes thereof in cases where the LLP has not commenced business or commercial operations since its incorporation.
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