Closing a Limited Liability Partnership: An Overview
Limited Liability Partnerships (LLP) that have not operated since incorporation or have not operated for more than one year may apply to the Registrar for closure and removal from the LLP Register. If the LLP is dormant, it is better to close it than to comply with all the compliance requirements, and it is better to close than pay a fine or penalty if the LLP is inactive.
The following conditions must be met for a Limited Liability Partnership to be closed:
It is not active since the date of its incorporation or for at least one year
It does not have any asset/liability on the date of application
LLP's current account has been closed.
All parties, such as creditors, authorities, or partners, have consented.
Reasons for the closing of Limited Liability Partnership:
LLPs are registered for specific purposes and fulfill those purposes.
The LLP has become insolvent.
When the LLP has not been active for at least one year.
LLP has been ordered closed by the court.
LLP partners do not wish to continue the partnership.
When a partner who is alive wants to close the LLP after the death of another partner/partners.
Documents Required to Close an LLP
In order to remove the name of the LLP, e-Form 24 must be completed with the following information:
Proof of Address for LLP
NOC from the landlord (if the registered office is rented, a lease agreement and one utility bill (water bill, electricity bill, property tax bill, gas receipt, etc.)
A statement of accounts showing NIL assets and NIL liabilities, made not earlier than thirty days after the date of filing Form 24, certified by a Chartered Accountant.
A copy of the acknowledgement of the latest ITR with self-explanatory notes
If the LLP agreement has been amended and not filed, a copy of the amended agreement,
LLP's designated partners, either jointly or separately, should sign an affidavit that states:
Where the Limited Liability Partnership had commenced business, it ceased to carry on such business.
In addition to having no liabilities, the Limited Liability Partnership indemnifies any liability that may arise after it is struck off the Register.
A Limited Liability Partnership has not opened a bank account and where one had been opened, it has since been closed with a certificate or statement from the bank demonstrating the closure;
In cases where the LLP has not carried on any business since its incorporation, it has not filed an income tax return.
NOC from creditors: - Secured creditors & Partners, if any, must approve the strike-off
Copy of Detailed Application- Mention full details of LLP as well as reasons for closure
The Authority to Make the Application must be signed by all partners
An indemnity bond is required:
Application forms must be accompanied by an Indemnity Bond duly notarized by each designated partner stating that even after the name of the LLP is removed, the liabilities will be met.
Indemnity Bonds should be issued on Non-Judicial Stamp Paper of adequate value in the state where the LLP's Registered Office is located. Therefore, the Indemnity Bond should be typed on the Non-Judicial Stamp Paper and then executed before a Public Notary.
Winding up an LLP used to be a lengthy and burdensome process before the LLP (Amendment) Rules, 2017. In contrast, with the introduction of LLP E-Form 24, the procedure has been simplified. LLLP Closing Procedure LLPs can apply to the Registrar for defunct status if they want to close their businesses or if they haven't carried on any business activity for at least a year. A) Dissolving a Limited Liability Partnership B) Dissolution of a limited liability company
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