Close the LLP

Overview

Closing a Limited Liability Partnership (LLP) requires a series of steps to be taken by the partners. The partners must complete all the necessary formalities to dissolve the LLP and close its operations. The process of closing an LLP involves meeting certain conditions, completing specific checklists, and submitting necessary documents.

Shutting down an LLP means ending its business and legally dissolving it. Reasons for closure include financial issues, failure to achieve goals or limited potential for growth. Closing an LLP is crucial to avoid annual filings like LLP Forms 8 & 11, and ITRs. Not filing these can lead to a daily fine of Rs 100 with no upper limit. Applying for closure shields you from legal action and fines due to non-compliance. The LLP, a business structure established by India’s LLP Act of 2008, offers benefits like audit exemptions, making it popular among entrepreneurs. LLPs with turnover under Rs 40 Lakhs or capital under Rs 25 Lakhs are audit-exempt.

Previously, closing an LLP was tough due to complex procedures. However the 2017 Amendment Rules simplified it with the introduction of LLP Form 24.

Conditions

To close an LLP, the following conditions must be met:

1. All the partners of the LLP must agree to the closure of the LLP.
2. The LLP must not have any pending legal proceedings against it.
3. The LLP must have filed all the necessary tax returns and paid all the applicable taxes.
4. The LLP must have settled all its debts and liabilities.

Checklist

The following checklist must be followed to close an LLP:

1. Hold a meeting of all the partners and pass a resolution to close the LLP.
2. Appoint a liquidator to handle the process of winding up the LLP.
3. Advertise the LLP’s intention to close in two newspapers – one in the local language and the other in English.
4. Notify all the creditors, employees, and other stakeholders about the closure of the LLP.
5. File Form 24 with the Registrar of Companies to initiate the process of winding up the LLP.
6. File the final tax returns of the LLP and obtain a tax clearance certificate.
7. Distribute the assets of the LLP among the partners after settling all the liabilities.

Procedure for Filing LLP Closure Request

The process of closing an LLP involves the following steps:

When closing an LLP, there are several stages involved to ensure a smooth and legally compliant process:

An LLP can close its business by either being declared defunct or through winding up:

1. Declaring LLP as Defunct:

   • Apply to the Registrar to declare the LLP defunct and remove its name from the register.
   • File e-Form 24 under clause (b) of sub-rule 1 of Rule-37 of LLP Rules 2008.
   • The Registrar will publish the application for public notice and may strike off the LLP’s name if no response is received within one month.

2. Winding Up of LLP:

   • Governed by Sections 63, 64, and 65 of LLP Act 2008.
   • Voluntary Winding Up: Partners decide to cease operations.
   • Compulsory Winding Up: Ordered by the Tribunal under specific conditions, such as reduced partners, inability to pay debts, or acting against public interest.

Steps for Closing an LLP

1. Calling a Board Meeting: Pass a resolution to close the LLP and authorize a designated partner to apply to the Registrar.
2. Settling Liabilities: Settle all liabilities before proceeding.
3. Application to ROC: File e-Form 24 with the required particulars and attachments, including:
   • Resolution for closure.
   • Statement of accounts certified by a Chartered Accountant.
   • Consent from partners and creditors.
   • Latest Income Tax Return acknowledgement.
   • PAN and closure statement of the bank account.

Documents from Partners and Designated Partners

• PAN and Aadhaar of partners.
• Latest address proof of partners.

Surrendering PAN and TAN

Once the closure certificate is received from the Registrar, surrender the PAN and TAN of the LLP.

Documents Required

An application must be made in e-Form 24 to remove the LLP’s name, including:

1. Address proof of the LLP.
2. NOC from the landlord (if the registered office is rented).
3. A statement of accounts showing NIL assets and NIL liabilities, certified by a Chartered Accountant.
4. Copy of the latest Income Tax Return acknowledgement.
5. Copy of the initial LLP agreement and any changes filed.
6. An affidavit signed by the designated partners stating:
   • The LLP has not commenced business or has ceased business.
   • The LLP has no liabilities and indemnifies against future liabilities.
   • The LLP has not opened any bank accounts, or if it has, they have been closed.
   • No Income Tax Return filed if the LLP has not carried on any business.
7. NOC from creditors (if applicable).
8. Detailed application with reasons for closure.
9. Copy of authority to make the application, signed by all partners.
10. Indemnity Bond:
    • Given by each designated partner, notarized, ensuring liabilities will be met even after closure.
    • On Non-Judicial Stamp Paper as per the state requirements.

Closing an LLP is a legal method to end its business and dissolve it officially. The steps include a general meeting with partners, stopping all business, closing bank accounts, and preparing documents like affidavits, indemnity bonds, and financial statements. These are needed to file Form 24. Make sure the LLP meets all closure conditions and has the right documents before applying. Proper paperwork and a correctly filled Form 24 can make the closure process quick and smooth.

If you need expert’s guidance in closing an LLP, contact Corporate Raasta Consulting.