Home Tax & Compliance Closure of LLP (Limited Liability Partnership)

Closure of LLP (Limited Liability Partnership)

Closing an LLP in India is a careful process that can be chosen or forced, controlled by specific legal provisions. The closure of an LLP requires obedience to pre-conditions such as paying all bills, stopping bank accounts, and filing overdue returns. The LLP Form 24 plays a key role in the closure process, requiring the LLP to have no assets or liabilities before asking for strike off. Designated partners must make papers showing the stop of commercial activities, and a working Chartered Accountant must accept the statement of accounts. Once all papers are made, including Form LLP 24, they are given to the Registrar for approval, leading to the printing of a notice of LLP closure.

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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 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, as it allows the partners of the firm to operate their business like a traditional partnership while enjoying the benefit of limited liability. However, there are instances when closing the LLP becomes necessary, mainly when the firm is not carrying any business or when continuing the business is no longer desirable or profitable. LLP can be closed by declaring an LLP as “Defunct”, winding up, and compulsory winding up. The closure of the LLP leads to the ceasing of its operations and the removal of all directors of the firm. Closing an LLP leads to stopping its operations and removing directors, and the business of the LLP is officially dissolved.

If you are looking to close your LLP, the process can seem complicated, but we are here to help! Our team is here to take care of everything from filing the required paperwork to making sure you follow all the necessary steps. Whether your LLP is no longer in business or you are ready to move on, we can guide you through the whole process smoothly and efficiently.

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 who have not conducted any business for at least a year. The LLP is declared ‘Defunct’ when it has not carried on any commercial operations 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. Before applying, the LLP must have no assets or liabilities, and all bank accounts should be closed. Additionally, consent from all partners is required.
Voluntary Liquidation: If the LLP has assets and liabilities, voluntary liquidation is the appropriate method. This process involves appointing a liquidator to sell the LLP's assets, settle its debts, and distribute any remaining assets among the partners. The procedure is governed by the Limited Liability Partnership (Winding Up and Dissolution) Rules, 2010, and requires the consent of all partners.
Compulsory Winding Up: If the LLP becomes insolvent and is unable to pay its debts, compulsory winding up is necessary. This legal process allows for the restructuring or liquidation of the LLP's assets under the supervision of a court-appointed official.

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 unauthorised 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

1. For Strike Off the Name:

No Business Activity: The LLP must not have conducted any business for at least a year.
No Assets or Liabilities: The LLP should have no outstanding debts or assets.
Consent of Partners: All partners must agree to the closure of the firm.

2. For Voluntary Liquidation:

Operational LLP: Suitable for LLPs that have assets and liabilities.
Partner Approval: Requires the consent of all partners.
No Ongoing Business: The LLP should not be carrying on any business during the liquidation process.

3. For Compulsory Winding Up:

Insolvency: The LLP must be unable to pay its debts.
The no. of partners in the LLP is reduced below 2 for more than 6 months.
The LLP has acted against the interests of the sovereignty, integrity, security, and public order of the nation.
The LLP has not filed an Annual Return for five consecutive financial years.
The LLP has made a default in filing the statement of accounts with the RoC.
The National Company Law Tribunal is of the opinion that it is just and equitable to wound up the LLP.

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 notarise affidavits.
Collect and prepare all necessary documents.
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 the LLP, the following documents are needed:

LLP Agreement
LLP PAN Card
Aadhar and PAN Card of all the Partners of LLP
Latest Address Proof of all the Partners of the LLP
DSC of all the Designated Partners of the LLP

Strike Off the Name	Voluntary Winding Up	Compulsory Winding Up
Form 24: Application for Closure. Written consent from each partner approving the Closure.	Resolution for Liquidation: A resolution passed by partners to initiate the liquidation process. Declaration for Solvency (Form 2): Obtained by the majority of the Designated Partners on an affidavit declaring the solvency status of the LLP.	Insolvency Petition: The petition is filed with the NCLT, which gives the detailed reasons for insolvency.
Statement of Accounts: A statement verified by a practising Chartered Accountant (CA) that shows nil assets and liabilities of the LLP. It should not be older than 30 days before the date of closure application filing.	Audited financial statement of the LLP by an auditor showing that the LLP is not carrying its business for two years or for the period after its incorporation, whichever is later
Affidavit and Indemnity Bond: It is executed by all partners who declare that the LLP has ceased operations and has no debts. Income Tax Returns: Copies of the latest filed Income Tax Returns.	Affidavit and Indemnity Bond: It is executed by all partners who declare that the LLP has ceased operations and has no debts. Income Tax Returns: Copies of the latest filed Income Tax Returns.	Affidavit: The firm's partners filed a signed and notarised affidavit that confirmed the LLP's inability to pay debts. Income Tax Returns: Copies of the latest filed Income Tax Returns.
	Statement of Affairs: A CA prepares the details of an LLP’s assets and liabilities.	Statement of Affairs: Professional liquidator who lists out the LLP’s assets and liabilities.

Process of an LLP Closure

The process of closing LLP is different for different methods. The detailed process is as follows:

1. Strike off the LLP’s Name

Make sure that LLP has no pending liabilities or assets.
All the firm's business activities should have ceased for at least 1 year or should have never commenced.
The firm's bank accounts should have been closed.
File Form 24 with the Registrar of Companies (RoC) to request for striking off.
The form is filed through the MCA portal.
Pending Return, if it exists in Form 8 and Form 11 to the financial year in which LLP ceased to carry out commercial activities, must be filed with Form 24.
Attach the following documents with the Form 24:
NOC from Regulatory Authority where LLP is registered
Indemnity Bond or Copy of undertaking for striking off the LLP’s name.
An evidence letter from the bank is required for the closure of the LLP.
Documents mentioned above
Once you file the form, the RoC will review the application. If everything checks out, they may publish a notice to the public, giving anyone a chance to object.
After the notice period and no objections are raised, the RoC will strike off the LLP’s name from the register, and the LLP will officially close.

2. Voluntary Liquidation

Partners have to pass a Declaration of Solvency (DOS) and prepare an audited financial statement by an auditor showing that the LLP has not carried its business for two years or the period after its incorporation.
Partners in the LLP pass a Resolution in the general meeting with a 3/4^th majority or 75% majority of the partners to initiate the winding-up process with 4 weeks of DOS. A copy of the Resolution is filed to the RoC through the MCA portal in Form No. One within 30 days of passing the Resolution.
Prepare Form 2 and attach:
- The statement containing that the LLP is not wound up to defraud its creditors
- Form 4 contains the LLP’s statements of assets and liabilities
Creditors must give their consent to wind up within 30 days of receiving the declaration. After obtaining permission from the creditors, notice for voluntary winding up shall be published in the region newspaper where the LLP is registered.
A liquidator shall be appointed by the partners who manage the entire winding-up process.
The liquidator will settle any outstanding debts and liquidate the assets to repay the creditors.
Once the liquidation is complete, the liquidator will prepare a report in Form 9 containing details about assets sold, debts cleared, and distribution.
In Form 10, the liquidator shall send the final copy of the accounts to the RoC.
Once the RoC reviews and accepts the final report, the LLP will be officially dissolved.

3. Compulsory Winding Up

If your LLP is unable to pay its debts, an application/petition by creditors, partners, LLP, or the government for insolvency is filed with the National Company Law Tribunal (NCLT). You also need to submit Form 8, containing details about the debtor, along with the application/petition.
The NCLT will appoint an insolvency professional, Liquidator, to take over the process.
The Liquidator in the Form prepares a report showing that all the debts and liabilities of the LLP are settled and the assets and property of the LP have been disposed of.
Once all the affairs of the LLP are settled, the NCLT will approve the final process of dissolution.

Why Choose Kanakkupillai for LLP Closure?

Kanakkupillai stands out as a top choice for LLP closure due to its knowledge, experience, and constant commitment to quality. With a deep understanding of the law and political situation surrounding the end of LLP, Kanakkupillai offers complete help and support throughout the entire process. Our team of professionals profoundly understands corporate laws and is familiar with the closure process for different kinds of companies, especially LLP. Our reputation for effectively assisting customers in navigating the complexities of Indian legislation promotes confidence in their services.

Our team handles the entire closure process, from collecting necessary documents to filing. We ensure that the closure process is completed as soon as possible. Clients who choose Kanakkupillai gain access to a fearless, goal-oriented workforce committed to offering the highest calibre of expert services without causing unnecessary delays.

We stand out in the industry due to our accuracy, meticulousness, and readiness to go above and beyond to address client concerns. Contact us Now!

Frequently Asked Questions

What is the process for closing an LLP in India? +

The process includes filling Form 24 with the Registrar of Companies (ROC), reporting end of business operations and agreement of partners. Liquidate assets, pay bills, and receive a statement of security. Finally, file Form 17 along with appropriate papers to properly end the LLP.

Can an LLP be closed voluntarily? +

Yes, LLPs can be stopped freely if they have finished all open compliance requirements, debts and liabilities are cleared, and partners unanimously agree to end the LLP.

What are the effects of non-compliance with LLP shutdown regulations? +

Non-compliance can lead to legal and financial effects, including fines for failing in making official reports.

How long does it take to close an LLP? +

The process can take around 3 to 6 months, based on the Registrar's office.

Are there any tax effects of closing an LLP? +

Yes, LLPs are needed to file income tax returns up to the date of the financial year during which they stopped operations.

Can an LLP be restarted after closure? +

No, once an LLP is taken off the record, it cannot be revived.

What are the key steps in the LLP closure process? +

The key steps include filling Form 24, selling assets, settling bills, getting a statement of stability, and filing Form 17 for split.

Do all partners need to agree on LLP closure? +

Yes, full permission from all partners is needed for closing an LLP.