Limited Liability Partnership (LLP) is a usual partnership form in which each partner has limited liabilities. In fact, an LLP is firm under which certain legal terms and documents take place. There is a pre-defined process as to how one can register or closure his/ her LLP. There are some merits to be in an LLP, but at the same time, there are few demerits as well.
In multiple occasions where people don’t even know how to register an LLP company, but, most of them do not have any idea that there is a strict process as to how an LLP to be closed, in India. In this blog, you will be removing such misconceptions and we have explained the detailed process and the documentation required to Close an LLP registered firm in India.
Requirements & Documents To Close An LLP
- The LLP must not have executed its business or commercial operations for the span of one year or more.
- A statement of account showing zero assets and liabilities made to till date not earlier than thirty days of the date of filing certified by a Chartered Accountant should be provided.
- The LLP must not own any liabilities and assets.
- The LLP must not own an active Bank Account. In case the Bank account was opened, the account must be closed and a statement or certificate from the bank saying the closure of Bank Account to be provided.
- All the Partners should have consent for filing the application.
- All Designated partners must have to execute a statement of fact, and Indemnity Bond agreeing to indemnify any liability that may arise after the name has been stroked out from the Registrar.
- Copy of the last Income-tax return filed by the LLP, if the LLP is maintaining any business and has filed some returns.
- The confirmation letter that the LLP has no liability or payment due to all the creditors.
- IT returns for the last Financial Year is filed without any due.
- The PAN card copies of all the designated partners.
- Aadhar proof ( scanned copy) of all the partners and designated Partners.
- The copy of LLP agreement; if available or the date of becoming Partner
- The permanent address of all the designated partners and partners.
Procedure To Wind Up An LLP
The default penalty for LLP’s defaulting in any statutory filing return is Rs.100 per day; not restricted to any maximum limit. So, it is the best option to windup dormant LLP’s as such there is nil requirement to file LLP Form 11 or LLP Form 8, and Income Tax Return filing for the LLP every financial year to maintain compliance and to avoid unnecessary penalty.
Previously to the introduction of the Limited Liability Partnership (Amendment) Rules in 2017, the procedure to wind up an LLP used to be a long and troublesome. But, with the introduction of LLP Form 24, the procedure has been made easy and simpler.
So, it is advisable for the Entrepreneurs having dormant or defaulting LLPs that are gaining penalty to make use of this opportunity to close the LLP.
Filing LLP Form 24
The following procedure shall be followed in India for closing an LLP by filing Form 24:
Step 1: Commercial Activity – Cease
LLP Form 24 has to be filed only by the LLPs which never commenced any business or have ceased any commercial activity. So, if the LLP is either operational or the promoters wish to shut off the LLP, the LLP must initially cease all commercial activities.
Step 2: Close Bank Account
LLP Form 24 should be filed only by those LLP that has nil creditors and zero open bank account. Hence, before to filing LLP Form 24, any such bank accounts opened in the LLP’s name must be closed and an evidencing closure letter of the bank account in the name of the LLP should be obtained from the Bank.
Step 3: Affidavits & Declaration Preparation
Every Designated Partner of the LLP should initially execute the facts of declaration, either jointly or separately, so that the Limited Liability Partnership ceased to carry forward commercial activity from the Date or has not begun business.
In addition to this, the LLP Partners should declare the LLP as it has no liability, any liability if arise even after striking off the LLP’s name from the Register. The Partners Liability shall not be stopped even after the closure of an LLP; while processing through Form LLP 24.
Step 4: Prepare Documents
With Form LLP 24, the income tax return statement of the LLP and the LLP’s deed must be offered. In case, the LLP has not filed the income tax returns and it has not processed any business activity, then the income tax return statement process shall not be needed. Or else, an acknowledgment copy of the last filed Income-tax return can be attached with the application for closing the LLP.
Step 5: File All Pending Documents
After the LLP incorporation, the agreement should be filed with the respective MCA within thirty days of registration. In any unavoidable circumstances, this compliance was missed to filed along with the LLP agreement, then the first LLP agreement; whether it is entered into and not filed, along with all amendments must be filed duly.
Added to this, any overdue return in Form 8 and Form 11 up to the end of the current financial year in which the limited liability partnership (LLP) ceased to take a move on its commercial operations or business must be filed on or before filing the LLP Form 24.
The cessation date of commercial operations is the date from which the ceased Limited Liability Partnership (LLP) has to carry forward its money-generating business, and the transactions such as cash receipts from the pupil who have their debt or money payment to creditors, subsequent to those cessations will not be the part of the revenue-generating business.
Step 6: Obtain a Chartered Accountant Certificate
Once the mandatory documents for filing the LLP Form 24 is prepared, an account statement disclosing zero assets and zero liabilities, that is authorized by a Chartered Accountant till date not earlier than 30 days of the Form 24 filing date 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.