A limited Liability partnership is essentially a partnership firm that possesses few of the most wonderful features of Companies. LLP is a body corporate that has a legal entity separate from its partners and has perpetual succession which means unlike a partnership firm where liability of partners is unlimited; the agents of LLP enjoy the fruits of being part of a limited liability entity. Since, limited Liability partnership is a creation of law and an entity incorporated with regards to the provisions of LLP Act of 2008, its closure would also require compliance with certain set requirements and mechanism as stated in the Act.
Methods of closing LLP
There are mainly two methods through which an LLP can be closed down, which are stated as below:
LLP carrying out its business actively can be closed down by two ways namely- voluntary winding up by partners or compulsorily by the order of Tribunal. Such closure requires disposing off of all assets and liabilities of the LLP followed by a formal distribution of surplus funds, if any generated by this process to all its partners/agents.
In case the LLP is desirous to close down its business or where the LLP has not been carrying any sort of business for the last 1 year then, members can move an application of closure to the Registrar for its declaration as a defunct entity. The LLP needs to file eForm 24 with the Registrar of LLP for striking off its names from the register of LLP. Other documents that need to be annexed to this form are copy of detailed application explaining reasons of closure, consent of all partners and creditors, indemnity bond, statement of assets/liabilities along with authority to make such application.
Voluntary winding up
In case the members of LLP decide to wind up their partnership, they’d need to pass a resolution for the same which is approved by not less than 2/3rd of total partners, a copy of which needs to be filed with Registrar within 30 days. The partners would then file declaration in Form No. 2 and 3 stating that they would pay all their debts within a period of 1 year and are not carrying out closure for defrauding anyone. Such Forms along with creditors consent shall be filed with Registrar followed by which the partners would appoint an official liquidator who’d undertake the task of realizing all assets and paying all liabilities.
An LLP can be compulsorily wound up by the Tribunal on the happening of certain events as mentioned below:
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