Closing a Limited Liability Partnership

An LLP can be closed, if it has not commenced business or is not engaged in the activity of business for the last 1 year. The closure application needs to be filed with the mutual consent of all the partners of the firm.

• Consent of Partners: All partners must agree to close the LLP.

• Settle Liabilities: Clear any outstanding debts.

• File with ROC: Submit dissolution forms like Form 24.

• Dissolution Agreement: File the agreement with the Registrar of Companies.

Closing an LLP - Overview

For closing an LLP, a resolution has to be filed by directors of the company with the Registrar of Companies, within 30 days of its passing. Within 15 days of passing the resolution the statement of assets and liabilities after the closure of accounts, to the date of winding up of the LLP, attested by at least two partners must be submitted. A report of the valuation of company assets must be prepared. Once this has been done, the majority of partners need to make a declaration to the effect that the LLP has no debts or that it is in a position to pay all debts within a specified period, not exceeding one year from the date of winding up of the company.

While registering for a business, you have different options like LLP or Limited Liability Partnership. If you have registered your company as LLP, then you would be required to file mandatory returns whether it is doing business or not. In case you fail to file the returns, then the LLP will be subjected to penalties under the LLP Act, and the partners in the firm will be liable to the same penalties. Hence, filing returns becomes a mandatory act in the case of LLP.

So, if you are not planning to file the return and close the LLP for certain reasons, then it must be closed as per the LLP Act. TheLegalLabs is a popular name when it comes to registration or closure of the LLP.

If you are willing to close the LLP, then it must meet the following conditions:

• The LLP should be inactive for a period of at least 1 year, or it should be inoperative from the date of establishment.
• The second condition is that the LLP should not have any assets on the date of application.

Moreover, there is detailed paperwork that needs to be done. The first thing that you need to do is to submit the application along with the required fees and affidavit along with consent from all partners of LLP. In addition, for the closure of LLP, you need to submit the IT return and a Statement of Accounts (of the last 30 days) from the date of application.

At this point, you must know that the closure of LLP can take up to two months, provided the partners are quick to complete the procedures involved.

Checklist for Closing Down an Llp

• The LLP to be closed down should not have commenced business after incorporation.
• The LLP to be closed down has not been engaged in any business for the past year.
• The LLP to be closed down has no assets and liabilities.

How to Close LLP in India

Step 1:Resolution for Closure of Llp

A special resolution has to be passed by all or ¾’thof the partners of the company, agreeing to dissolve the partnership.

Step 2: Form No. 1

Within 30 days of passing the resolution for closure of llp, form no.1 is filed with the Ministry of Corporate Affairs (MCA) with a copy of the resolution,

Step 3: No Debt Declaration

At least two members of the LLP have to declare that it has no debts or liabilities. Or if it does, it will be settled within one year from the commencement of winding up.

Step 4: Form 4 & Value of Assets

Form No. 4 along with a report of the value of LLP’s assets has to be submitted to the registrar within 15 days of filing the forms and a statement declaring that the LLP is not being closed to cheat anyone.

Step 5: Creditor Consent

The next step is to acquire consent from the creditors of the LLP, to wind up the business. For this purpose, at least ⅔’rd of company creditors have to provide consent.

Step 6 – Filing Form 6

Within 14 days of receiving consent from creditors, an advertisement has to be filed in the local newspaper. In case if the LLP has assets or liabilities, a liquidator is appointed and his/her statement needs to be filed using form 6.

Step 7: Filing Form 9

Prepare the LLP’s final account statement, and submit them along with form 9 to conclude all formalities.

TheLegalLab’s Procedure for Winding Up

Form 24 LLP

Form 24 will be filed with the Registrar of Companies along with the declaration from the partners. In addition, you need to submit indemnity bonds and an affidavit stating that the information is true to the knowledge of all the partners.

Public Notice

The Registrar of Companies will publish a notice on its website stating the contents of the application, for a period of one month.

Removal Of LLPs Name

After one month, the Registrar of Companies will remove the LLP's name from the register and publish a notice in the Official Gazette, thereby legally closing/dissolving the LLP closure documents format.

Documents Required from Partners & Designated Partners For Closing An LLP

Partners need to submit the following documents for closure of llp:

• PAN Card of Partners- Apart from the application form and indemnity which needs to be submitted to the registrar, for the closure of LLP, you are also required to submit PAN cards of all the partners and designated partners of LLP.
• Aadhaar Card of Partners- Similar to PAN card, another document that needs to be submitted for closure of LLP is the Aadhaar card of all the partners and designated partners of LLP
• Latest Address Proof of Partners- In addition to the above mentioned two documents, the latest address proof of all the partners of LLP is also needed to be submitted.
• Consent letter- For the closure of LLP, you would also be required to get the consent letter signed by all the partners and submit it along with form and fees.

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Recent Updates

MCA has notified new rules for winding up companies

3-Jun-2020: The Ministry of Corporate Affairs (MCA) has recently notified The Companies (Winding up) Rules, 2020. These new rules have become effective from 1st April 2020. These rules look to make the closing procedure simpler for smaller companies, without the intervention of the tribunal. However, these rules will be applicable only to certain classes of companies which are mentioned under Section 361 of the Companies Act, 2013.

FAQ's on Closing a Limited Liability Partnership

• How can I close my LLP?

To close your Limited Liability Partnership (LLP), you must follow a process called 'winding up'. This involves settling debts, distributing assets, and filing necessary forms with the Ministry of Corporate Affairs.

• What are the reasons for closing an LLP?

An LLP may close for various reasons like insolvency, mutual agreement among partners, non-compliance with laws, or inability to meet its financial obligations.

• Can an LLP be closed voluntarily?

Yes, an LLP can be closed voluntarily by obtaining consent from its partners.

• What is the role of a liquidator in winding up an LLP?

A liquidator oversees the process of winding up an LLP. This includes selling assets, paying off debts, and distributing the remaining assets among partners.

• How long does it take to wind up an LLP?

To start the winding-up process of an LLP, you must first pass a resolution. This resolution must be filed with the registrar within 30 days of being passed. The voluntary winding-up of the LLP is considered to start from the date the resolution is passed.

• Can I reopen an LLP after it has been closed?

Generally, once an LLP is closed or 'wound up', it cannot be reopened. You would need to establish a new LLP.

• Do I need professional assistance to close a service-based LLP?

While it's possible to close an LLP on your own, getting professional help can simplify the process and ensure legal compliance.Get in touch with a TheLegalLabs expert today.

• What role does a liquidator play in winding up a service-based LLP?

In a service-based LLP, the liquidator's role remains the same. They manage the winding-up process, which includes settling debts, distributing assets, and ensuring that all legal and regulatory procedures are followed.

• What is the process of closure of defunct LLP?

If you are planning to close the LLP or Limited Liability Partnership, then you have to follow the process mentioned below:

1. Closure of business operations- When you are planning to close the LLP, then you must first close the current business operations.

2. Close the bank account- Once you have closed business operations

3. Preparing the closing statement of accounts- The next step is to close the statement of accounts.

4. Application to ROC-LLP Form 24- At this stage, the partners of LLP are required to file an application to the registrar along with an affidavit and fees along with the consent of all the partners.

In case you are unsure of the steps and process of closure of LLP, then you can connect with TheLegalLabs for assistance. We have a team of qualified professionals who will help you with the same.

• If there is a need for striking off a by a defunct LLP, what are conditions need to be met?

If the LLP fulfills the following condition, it can file an application for striking off its names from the register of LLP:

1. The LLP must have a PAN

2. The LLP should be inactive for a period of at least one year or non-operational from the time of incorporation

3. There should be no live bank account at the time of application

4. The LLP should have filed the latest IT returns.

• In case of closure of defunct LLP, who has to sign the application?

In case of closure of defunct LLP, the designated partners have to sign the application for the closure of defunct LLP along with the consent of other partners.

• What is the process of leaving a LLP?

A partner may resign in the absence of a written agreement by giving notice to the other partners. Such notice has to be sent 30 days before the resignation date. The obligations of a Partner with regard to an LLP are not automatically released upon resignation from the LLP.

• What is Form 24 for closure of LLP?

Only LLPs without any open bank accounts or creditors may file LLP Form 24. Therefore, any bank account opened in the name of the LLP must be closed before completing LLP Form 24, and the Bank must provide a letter attesting to the closing of the account.

• What is the penalty for non filing of return for LLP?

Before 30 of May each year, all LLPs having an Indian registration must submit Form 11 to the Ministry of Corporate Affairs (MCA). Details on the number of partners, total number of partners, total contribution received by all partners, information about body corporations as partners, and a summary of partners are all included in Form 11.

• What is Form 24 for closure of LLP?

Only LLPs that have either stopped doing business or have never started it can file an LLP Form 24. Therefore, if the LLP is already in operation and the promoters want to close it, the LLP must first stop all business operations.