The Limited Liability Partnership (LLP) is a typical form of partnership in which each partner has limited liabilities. The procedure for closing an LLP in India and the required documents are listed below. In fact, an LLP is a firm that executes certain legal documents and terms. There is a predetermined procedure for registering or closing an LLP. An LLP has its advantages and disadvantages, but it also has a few advantages.
The entire procedure may take between three and six months to complete, depending on the Registrar’s office. The information will be made available to the general public for one month on the Ministry of Corporate Affairs’ website following the application’s approval.
There are numerous instances in which individuals do not even know how to register an LLP, and the majority of them are unaware that India has a strict closure procedure for LLPs. You will dispel these misconceptions by reading this blog, where we provide an in-depth explanation of the steps required to close an LLP registered firm in India.
Seven Major Steps to Closing an LLP in India:
Step 1: Passing a Resolution; Step 2: Filing Form 1; Step 3: Declaring Debt; Step 4: Declaring Asset Value; Step 5: Getting Consent from Creditors; Step 6: Filings and Appointment of Liquidator; Step 7: Finalizing LLP Accounts Requirements and Documents To Close An LLP To close an LLP, you must file an application that includes an indemnity
The LLP cannot have carried out its commercial or business activities for more than a year.
Not later than thirty days after the filing date, a statement of account signed by a Chartered Accountant must be provided showing no assets or liabilities.
There must be no assets or liabilities owned by the LLP.
There cannot be an active bank account for the LLP. If the bank account was opened, it must be closed, and the bank must provide a statement or certificate stating the account’s closure.
The application should be submitted with the consent of all Partners.
A statement of fact and an indemnity bond agreeing to indemnify any liability that may arise after the name has been stroked out from the Registrar must be signed by all designated partners.
If the LLP is operating a business and has filed returns, a copy of the most recent income tax return.
The letter confirming that the LLP is not responsible for any debts or owes any money to any creditors.
The IT returns for the most recent fiscal year have been filed without any due dates.
The copies of each designated partner’s PAN card.
Scannable Aadhar copies of all partners and designated Partners.
The copy of the LLP contract; If it is available, or the date you became a partner, the permanent address of all designated partners and partners.
Procedure for Winding Up an LLP If an LLP wants to shut down its business or hasn’t done so in a year or more, it can apply to the Registrar to have its name removed from the Registrar’s list of LLPs and the LLP declared defunct. A limited liability partnership is considered dormant in the eyes of the law and has its name removed from the register if it does not begin or continue operating its business for a predetermined amount of time. The following events result in the dissolution of an LLP: One or more partners pass away or file for bankruptcy.by court order or mandatory judicial decision. End of the term.
The default penalty for the LLP’s failure to file any statutory filing return during the winding-up or dissolution process is Rs. 100 per day;not constrained by any upper limit. As a result, winding up dormant LLPs is the best option because the LLP does not need to file an Income Tax Return or LLP Form 8 each year to stay in compliance and avoid paying unnecessary penalties.
Prior to the Limited Liability Partnership (Amendment) Rules’ introduction in 2017, the procedure for winding up an LLP was lengthy and difficult. However, the procedure has been simplified and made easier with the introduction of LLP Form 24.
Therefore, entrepreneurs with dormant or defaulting LLPs subject to penalties should take advantage of this opportunity to close the LLP.
Filling out LLP Form 24 In India, the following steps must be taken when filing Form 24 to close an LLP:
The only LLPs that are required to file the Commercial Activity – Cease LLP Form 24 are those that have either ceased all commercial activity or never started a business. Therefore, the LLP must initially cease all commercial activities if the promoters wish to shut down the LLP or if the LLP is operational.
Only LLPs with zero open bank accounts and no creditors should file Close Bank Account LLP Form 24.Therefore, an evidencing closure letter for the bank account in the name of the LLP should be obtained from the Bank prior to filing LLP Form 24 for any such bank accounts that were opened in the LLP’s name.
Preparation of Affidavits and Declarations Every Designated Partner of the LLP should first sign the facts of the declaration, either jointly or separately, to indicate that the Limited Liability Partnership has ceased all commercial activity since the Date or has not begun business.
In addition, the LLP Partners should declare that the LLP is not liable, regardless of whether or not the LLP’s name is struck from the Register. Even after an LLP is closed, the Partners’ Liability continues; while utilizing Form LLP 24 for processing.
Prepare Documents The LLP’s deed and income tax return statement must be presented on Form LLP 24.The income tax return statement procedure will not be required if the LLP has not processed any business activity and has not filed any income tax returns. Alternately, the application to close the LLP may be accompanied by an acknowledgment copy of the most recent filed income tax return.
After the LLP is formed, the agreement needs to be submitted to the appropriate MCA within thirty days of registration. This compliance was not filed with the LLP agreement, then the first LLP agreement, in any unavoidable circumstances; regardless of whether it has been signed and filed, all amendments must be filed properly.
In addition, the limited liability partnership (LLP) must file any overdue returns on Forms 8 and 11 by the end of the current fiscal year in which it ceased to conduct commercial operations or business before submitting LLP Form 24.
The Limited Liability Partnership (LLP) must continue its money-generating business after the commercial operations cease, and any subsequent transactions, such as cash receipts from students who have debt or money payments to creditors, will not count as part of the revenue-generating business.
An account statement authorized by a Chartered Accountant that discloses zero assets and zero liabilities must be obtained within thirty days of the filing date of the LLP Form 24, after the necessary documents for the form have been prepared.
File LLP Form 24 All of the aforementioned documents should be filed with the MCA to remove the LLP’s name. The LLP Form 24 can be downloaded here. while the application is being processed; If anything is found to be acceptable, the company’s registrar will send a detailed notice to the MCA website announcing the LLP’s name removal.