Closure of an LLP in India - Procedure and Documents Required | Jordensky

Closure of an LLP in India - Procedure and Documents Required to close an LLP in India

Closure of an LLP in India - Procedure and Documents Required | Jordensky

Closure of LLP in India – Procedure & Documents required in India

A limited liability partnership (LLP) is a common type of partnership in which each member has limited liability. There is a pre-defined procedure for registering or closing an LLP. Being a member of an LLP has some advantages, but it also has some disadvantages.

The complete process of closure could take 3 to 6 months, depending on the Registrar's office. Following approval of the application, the details will be made available to the general public for 1 month on the Ministry of Corporate Affairs' website.

People frequently do not know how to form an LLP corporation, and the majority are ignorant that there is a stringent method in India for shutting an LLP. In this blog post, we will outline the entire procedure of closing an LLP registered firm in India.

7 Major Steps to Close an LLP in India

  • Step 1 – Pass a Resolution
  • Step 2 – Form 1 Filings
  • Step 3 – Declaration of the Debt
  • Step 4 – Form 4 & Value of the Assets
  • Step 5 – Obtain consent from the Creditors
  • Step 6 – Filings and Appointment of Liquidator
  • Step 7 – Finalization of the Accounts of LLP

Requirements & Documents to Close an LLP

  • To dissolve an LLP, you must submit an application that has been approved by partners and creditors, as well as an indemnity bond, a statement of assets and liabilities, an acknowledgement of ITR, a resolution and other documentation.
  • For at least a year, the LLP must not have engaged in any business or commercial operations.
  • A statement of account, certified by a Chartered Accountant detailing zero assets and liabilities made to the date of filing and not earlier than thirty days should be submitted.
  • The LLP cannot have any assets or liabilities.
  • The LLP is not permitted to maintain an active bank account. If a bank account was opened, it must be canceled, and a bank statement or certificate certifying the closing of the bank account must be provided.
  • The application must be submitted with the approval of all Partners.
  • All Designated Partners must sign a statement of fact and an indemnity bond agreeing to indemnify the Registrar for any liability arising  after the name has been struck out.
  • If the LLP is still in business and has filed returns, a copy of the most recent income-tax return submitted by the LLP is required.
  • The confirmation letter states that the LLP is not obligated or liable to all creditors.
  • The preceding fiscal year's IT returns were filed without penalty.
  • PAN card copies for all designated partners
  • Aadhar verification is required for all partners and designated Partners (scanned copy).
  • A copy of the LLP agreement, or the date of becoming a Partner, if available.
  • All designated partners and partners' permanent addresses.

Procedure to Wind Up an LLP

If the LLP decides to close its doors or cease all business operations for a period of one year or more, it may apply to the Registrar to have the LLP declared defunct and its name removed from the Registrar's register of LLPs. If a limited liability partnership does not commence or continue to operate for a set period of time, it is considered dormant by the law and its name is removed from the register. An LLP is dissolved under the following circumstances:

The death or bankruptcy of one or more partners. Court Order /Mandatory Judicial Decision Expiration of the term

The default penalty for failing to file any statutory filing return throughout the LLP's winding-up or dissolution process is Rs.100 per day, with no maximum limit. As a result, it is the best option for dormant LLPs because there is no requirement to file LLP Form 11 or LLP Form 8, and Income Tax Return for the LLP every fiscal year to maintain compliance and avoid exorbitant fines.

The procedure for dissolving an LLP was lengthy and complicated prior to the enactment of the Limited Liability Partnership(Amendment) Rules in 2017. The procedure, however, has been streamlined and made easier with the introduction of LLP Form 24.

As a result, entrepreneurs who have dormant or defaulting LLPs that are incurring fines should use this chance to close the LLP.

Filing LLP Form 24

To close an LLP in India, the following procedures must be followed:

Step 1: Commercial Activity – Cease

LLP Form 24 is only required for LLPs that have never established a business or have ceased commercial activity. As a result, whether the LLP is still in operation or the promoters decide to close it down, the LLP must first suspend all commercial operations.

Step 2: Close Bank Account

Only LLPs that have never established a business or have ceased commercial activity are needed to complete LLP Form 24. As a result, whether the LLP is operating or the promoters decide to close it down, the LLP must first suspend all commercial activity.

Step 3: Affidavits & Declaration Preparation

Every LLP Designated Partner should first execute the facts of declaration, either jointly or separately, so that the Limited Liability Partnership does not carry forward economic activity from the Date.

Furthermore, the LLP Partners should declare the LLP as having no liability, as any liability that may develop even after striking the LLP's name from the Register should be declared by the LLP Partners. Even after an LLP is closed, the Partners Liability does not end until Form LLP 24 is completed.

Step 4: Prepare Documents

Form LLP 24 must be provided along with the LLP's income tax return statement and deed. The income tax return statement process is not required if the LLP has not filed any income tax returns and has not engaged in any business activities. An acknowledgment copy of the most recently filed income-tax return can also be attached to the application to end the LLP.

Step 5: File all Pending Documents

The agreement must be submitted with the appropriate MCA within thirty days of the LLP's formation. If this compliance was not filed with the LLP agreement owing to unforeseen circumstances, the original LLP agreement, whether entered into and not filed, as well as all changes, must be filed.

Furthermore, any overdue Form 8 and Form 11 returns filed prior to the end of the current fiscal year in which the limited liability partnership (LLP) ceased to conduct commercial activities or business must be filed on or before the LLP Form 24 is submitted.

The commercial operations cessation date is the date from which the dissolved Limited Liability Partnership (LLP) is no longer required to carry on its money-generating business, and subsequent transactions such as cash receipts from students who owe money or money payment to creditors will not be considered revenue-generating business.

Step 6: Obtain a Chartered Accountant Certificate

After completing the necessary paperwork for submitting the LLP Form 24, an account statement with zero assets and zero liabilities that has been authorized by a Chartered Accountant up to the date of the Form 24filing must be obtained.

Step 7: File LLP Form 24

All the mentioned documents along with the LLP Form 24 (Download- LLP Form 24) should be then filed along the MCA to remove the name of LLP. While processing the application; found any acceptable, the concerned Company’s Registrar will send a detailed notice to be published on the MCA website announcing the name removal of the LLP.

About Jordensky

At Jordensky, we are committed to providing an experience of the highest caliber while specializing in accounting, taxes, MIS, and CFO services for startups and expanding businesses.

When you work with Jordensky, you get a team of finance experts who take the finance work off your plate– ”so you can focus on your business.