Closure of LLP (Limited Liability Partnership)

Overview of LLP Closure

At Kanakkupillai, we understand that running a business comes with its challenges, and sometimes, despite our best efforts, we need to close our business.

The Limited Liability Partnership (LLP) is a corporate body formed and incorporated under the Limited Liability Partnership Act, 2008, that offers the benefits of limited liability to its partners. It is a hybrid business structure between a partnership firm and a company, allowing the partners of the firm to operate their business like a traditional partnership while enjoying the benefits of limited liability. However, there are instances when closing the LLP becomes necessary, especially when the firm is no longer profitable or active.

The closure of an LLP can be done through various methods, including declaring the LLP as "Defunct," voluntary liquidation, or compulsory winding up. The process involves several legal steps to ensure the business ceases operations, and the directors are officially removed from the firm.

If you are looking to close your LLP, the process may seem complex, but we are here to help! Our team will guide you through the entire procedure, including filing the necessary paperwork and ensuring compliance with all required steps. Whether your LLP is no longer in business or you are ready to move on, we will make sure the process is smooth and efficient.

Contact us today to get started, and we will handle the details for you.

Methods of Closing an LLP

In India, a Limited Liability Partnership (LLP) can be closed through three primary methods:

• Striking Off the Name: This method is suitable for LLPs that have not conducted any business for at least a year. The LLP is declared ‘Defunct’ when no commercial operations have been carried out in the firm for a year or more. The entire process involves applying to the Registrar of Companies (RoC) to remove its name from the register. The LLP must have no assets or liabilities, and all bank accounts must be closed before applying. Consent from all partners is also required.
• Voluntary Liquidation: This method is suitable for LLPs with assets and liabilities. In this process, a liquidator is appointed to sell the LLP's assets, settle its debts, and distribute the remaining assets among the partners. This procedure is governed by the Limited Liability Partnership (Winding Up and Dissolution) Rules, 2010, and requires the consent of all partners.
• Compulsory Winding Up: This method is necessary if the LLP becomes insolvent and is unable to pay its debts. It involves a court-appointed official overseeing the liquidation and restructuring of the LLP's assets.

Benefits of LLP Closure

• Avoids Legal Penalties – Prevents fines for non-compliance with ROC filings.
• Stops Unnecessary Costs – Eliminates annual compliance and maintenance expenses.
• Protects Partners – Ends personal liability for future LLP obligations.
• Clears Tax Burden – Stops tax filings and other financial obligations.
• Prevents Misuse – Avoids unauthorized use of the LLP’s name or identity.
• Frees Business Name – Allows reuse of the name for future ventures.
• Ends Dormant Status – Officially removes inactive LLPs from records.
• Simplifies Future Ventures – Makes it easier to start new businesses.
• Avoids Legal Hassles – Prevents complications from non-operational entities.
• Ensures Clean Records – Keeps partners’ compliance history clear.

Requirements for LLP Closure

• For Strike Off the Name: The LLP must not have conducted any business for at least a year, have no assets or liabilities, and obtain consent from all partners.
• For Voluntary Liquidation: The LLP should have assets and liabilities, and requires the consent of all partners. The LLP should not be carrying on any business during the liquidation process.
• For Compulsory Winding Up: The LLP must be insolvent, unable to pay debts, have fewer than 2 partners for more than 6 months, or violate certain legal or regulatory conditions.

Checklist for LLP Closure

While applying for Closure of an LLP, remember:

• Form 24 can only be filed by LLPs that have ceased all commercial activities.
• All bank accounts in the name of the LLP must be closed.
• Affidavits and declarations must be drafted, signed by the designated partners, and included with the Form 24 application.
• An Authorized Notary should notarize affidavits.
• Prepare all necessary documents before submission.
• After submitting Form 24, wait for clearance from the ROC. The ROC may request additional documents for further verification.

Documents Required for LLP Closure

To close an LLP (Limited Liability Partnership) in India, certain legal documents must be submitted to ensure compliance with the regulations. Below is a comprehensive list of the required documents for the closure process:

• LLP Agreement: The original agreement outlining the terms and conditions between all partners of the LLP.
• LLP PAN Card: The PAN card of the LLP for identity verification during the closure process.
• Aadhar and PAN Card of all the Partners of the LLP: Identity and residency proof of all partners involved in the LLP.
• Latest Address Proof of all the Partners: Proof of address for all the LLP partners (e.g., utility bill or bank statement).
• DSC of all Designated Partners: Digital Signature Certificates (DSC) of all designated partners are needed to authenticate the documents submitted online.
• Strike Off the Name: Required documents for filing the application to remove the LLP’s name from the official register if it is not carrying on business.
• Voluntary Winding Up Documents: Documentation for the voluntary winding-up process, including a resolution passed by all partners.
• Compulsory Winding Up Documents: Documents required if the LLP is undergoing compulsory winding up, including a petition to the NCLT.
• Form 24: Application form for the closure of the LLP to be filed with the Registrar of Companies (RoC).
• Written Consent from Each Partner: Written consent from all partners approving the closure of the LLP.
• Resolution for Liquidation: A resolution passed by the partners to initiate the liquidation process.
• Declaration for Solvency (Form 2): Declaration from the majority of the designated partners on an affidavit confirming the solvency status of the LLP.
• Insolvency Petition: A petition filed with the NCLT providing detailed reasons for insolvency if applicable.
• Statement of Accounts: A statement verified by a Chartered Accountant (CA) showing that the LLP has no assets or liabilities. This statement must not be older than 30 days before the closure application is filed.
• Audited Financial Statement: An audited financial statement by an auditor showing that the LLP has not been carrying out any business for two years or more since incorporation.
• Affidavit and Indemnity Bond: An affidavit executed by all partners declaring that the LLP has ceased operations and has no outstanding debts.
• Income Tax Returns: Copies of the most recent income tax returns filed by the LLP.
• Affidavit for Inability to Pay Debts: An affidavit filed by all partners confirming that the LLP is unable to pay its debts, if applicable.
• Statement of Affairs: A detailed statement of the LLP’s assets and liabilities prepared by a Chartered Accountant or professional liquidator.

These documents are essential to ensure that the closure process is completed legally and in accordance with the regulatory requirements. Proper preparation and submission of these documents will help facilitate the efficient winding-up of the LLP.