An LLP is a distinct legal entity that must be established through legal channels. There is a suitable legal process that must be followed when it comes to terminating the LLP. Make sure you have submitted all necessary papers and returns before closing your LLP. This article has covered both the closure of an LLP and other information you should be aware of before doing so.
The Limited Liability Partnership (LLP) is a common type of partnership where each member is solely responsible for a set amount of money. It allows for greater financial flexibility. An LLP functions as a real company with all the necessary paperwork and legal obligations. For many LLPs, the closing-up process can be expensive or time-consuming because it necessitates tribunal approval and the participation of liquidators. As a result, an LLP that has been inactive since it was founded or for more than a year may proceed with the simple method of exit, i.e. Strike-off. After the Ministry publishes the notice, the LLP will be deemed invalid. The LLP ceases to exist in the eyes of the law once it is struck off. Know the process to close an LLP fast and efficiently.
Limited Liability Partnership Explained
A limited liability partnership (LLP) is a type of business structure that allows for an unconventional corporate structure while limiting the owners’ liability. With this mode of operation, owners can work at the same level and status within the organisation.
Limited liability partnerships are distinct from “conventional” commercial partnerships and the limited company structure, and are governed by several pieces of legislation, including the Limited Liability Partnership Regulations, 2001.
Reasons to Close an LLP
Prior to the adoption of the Limited Liability Partnership (Amendment) Rules, 2017, the process for dissolving a Limited Liability Partnership (LLP) was lengthy and complicated. However, with the introduction of LLP Form 24, the process has been simplified and uncomplicated.
Following are some of the reasons why an LLP can be closed and to look to close an LLP fast and efficiently.
- Some startups just started with an idea, but after testing them, they find that there is no profit, so they want to close the LLP
- LLP has declared bankruptcy
- After the death of a partner, only one partner remains and wishes to close the business
- For a long time, there has been no commercial activity
- Partners are unwilling to continue the partnership or the business
- If the LLP is registered for and has completed a specific project.
Procedure to Close an LLP
Here is the procedure to close an LLP fast and efficiently.
- Deliver the documents using a shared checklist.
- If you have a bank account, close it and obtain a closure certificate.
- Obtain a NIL statement of accounts from a chartered accountant and gather all required documentation for filing.
- LLP Form 24 must be submitted within 30 days of the date the chartered accountant provides the NIL statement.
Documents to Close an LLP
The following documents are required to close an LLP fast and efficiently
- Detailed application for Limited Liability Partnership (LLP) dissolution
- An affidavit signed individually or jointly by all partners
- All partners’ agreement
- Statement of accounts demonstrating nil assets and liabilities, certified by a chartered accountant in practice, not more than 30 days old from the date of application filing
- A copy of the latest Income Tax Return acknowledgment
- The initial LLP agreement and supplementary agreements.
LLP Documents
- LLP agreement of partners
- Recent income tax returns
- Bank account closure documents
- Recent statements of accounts of LLP
- PAN copy of LLP.
Documents Needed from Partners
- Pan copy of partners
- Aadhaar copy of partners
- Recent address proof of partners.
Removal Process of an LLP Name
The Registrar or the LLP in e-Form 24 can begin the process of having the LLP’s name struck out with the approval of all partners. Upon receipt of the application, the Registrar would send a notice to the limited liability partnership and all of its partners informing them of his intention to remove the limited liability partnership’s name from the register and requesting any relevant documents.
If any, within one month of the date of the notice, along with copies of their representations. The notice for the removal of the LLP’s name is also posted on the MCA website for the benefit of the general public.
Complications in Closing an LLP
When a business fails, it is dissolved and its assets are distributed to its creditors. The company is no longer a legal entity at this point. While the company’s assets will be distributed to its creditors, the company will not be dissolved.
When a company goes out of business, its charter expires and a new set of documents is required. The new documents include the company’s name, a new legal form, and a new logo. All of this must be done quickly because the old company will have been wound down and its assets distributed by the time the new company is formed and registered.
Conclusion
The process of closing a business can be time-consuming and complicated. Even if there are no difficulties, it may be necessary to wind down a defunct firm in order to ensure that future operations remain entirely focused on serving current customers and existing partners in good standing.
The experts at Vakilsearch can assist you with closing LLP. Vakilsearch professionals help partnership firms form and close their operations, ensuring a smooth transition.
Read, More;
- Requirements for Converting a Partnership to an LLP
- Benefits Of Conversion of Partnership Firm Into LLP
