The declaration must be submitted with Form 24 by the partners, after which the registrar will publish it to the website and proclaim the LLP closed. Find more information regarding the closure of LLP.
Close an LLP
LLPs that fail to file any statutory return are subject to a penalty of ₹ 100 per day, with no maximum limit. Consequently, it is often advisable to wind up dormant LLPs to avoid the need for filing LLP Form 11, LLP Form 8, and the LLP’s Income Tax Return each financial year, thereby ensuring compliance and preventing penalties.
Previously, prior to the enactment of the Limited Liability Partnership (Amendment) Rules, 2017, the procedure for winding up an LLP was lengthy and burdensome. However, the introduction of LLP Form 24 has simplified and streamlined the process.
Therefore, entrepreneurs with dormant or defaulting LLPs that are incurring penalties should take advantage of this opportunity to close the LLP.
Documents Required for Closing a LLP
Below is a list of the necessary documents that LLPs must submit to initiate the closure process:
- Application for LLP Closure
- Consent of all partners
- Statement of company accounts, verified by a practicing Chartered Accountant, demonstrating zero liabilities and assets. The statement should be dated no more than 30 days prior to the application filing date.
- An affidavit executed individually or jointly by all partners.
- Copy of the most recent Income Tax Return acknowledgment.
- Initial LLP Agreement along with any supplementary agreements, if applicable.
Step-by-step Procedure for Filing a Request to Dissolve the LLP
The closure of an LLP registration through the submission of Form 24 can be accomplished by following the procedure outlined below:
Step 1: Cease Commercial Activity
LLP Form 24 is applicable only to LLPs that have either never commenced business or have ceased their commercial activities. Therefore, if the LLP is operational and the promoters intend to close it, all commercial activity must first be stopped.
Step 2: Close Bank Account(s)
LLP Form 24 can be filed only by LLPs with no outstanding creditors and no active bank accounts. Prior to submitting Form 24, any bank account opened in the name of the LLP must be closed, and a letter confirming the closure of the LLP’s bank account must be obtained from the bank.
Step 3: Prepare Affidavits & Declaration
All Designated Partners of the LLP must execute an affidavit, either jointly or individually, stating that the LLP has either ceased commercial activity as of a specific date or has not commenced business at all. Additionally, the LLP partners must declare that the LLP has no liabilities and indemnify any potential liabilities even after the name is struck off the register. The closure of the LLP using Form LLP 24 does not extinguish the partners’ liability.
Step 4: Prepare Documents
Form LLP 24 should be accompanied by the LLP’s income tax return and LLP deed. If the LLP has not filed any income tax return and has not engaged in any business activity, this requirement does not apply. However, if an income tax return has been filed, a copy of the latest acknowledgment must be included with the LLP closure application.
Step 5: File Any Pending Documents
If the LLP agreement was not previously filed with the MCA within 30 days of registration, it must be submitted along with any subsequent amendments. Additionally, any overdue returns in Form 8 and Form 11 until the end of the financial year in which the LLP ceased its business operations must be filed prior to submitting LLP Form 24. The date of cessation of commercial operations is the date from which the LLP discontinued its revenue-generating activities, and any transactions such as debt collection or creditor payments after that date do not contribute to the revenue-generating business.
Step 6: Obtain a Chartered Accountant Certificate
Once all the necessary documents for filing Form 24 have been prepared, a statement of accounts indicating zero assets and liabilities, certified by a practicing Chartered Accountant and dated no earlier than thirty days before the filing date of Form 24, must be obtained.
Step 7: Submit LLP Form 24
The aforementioned documents, along with the completed LLP Form 24, should be filed with the MCA to request the striking off of the LLP’s name. Upon processing the application and if found acceptable, the Registrar of Companies will publish a notice on the MCA website announcing the LLP’s striking off.
Legal Procedure For Closing a LLP
If an LLP wishes to remove its name from the register, it must follow the procedure outlined below:
- The LLP should have no assets and liabilities and should provide indemnification for any potential liabilities even after its name is struck off from the register.
- The LLP is required to submit Form 24 to the Registrar of Companies (ROC).
- The filing fee for the Fast Track Exit (FTE) application is ₹ 500.
- Before filing Form 24, the LLP must fulfill the requirement of submitting overdue returns in Form 8 and Form 11 for the entire financial year in which the LLP ceased its business or commercial operations. It is important to note that the Registrar of Companies (ROC) may request additional information or seek clarifications depending on the specific case.
Benefits of Closing an LLP
Entrepreneurs who have adopted the LLP model can choose to close down their LLP by following the formal LLP closure process. This ensures the elimination of any existing documentation or transactions between the business and its shareholders, reducing confusion between the old and new corporations.
Closing the LLP removes barriers that impede the growth of the newly formed business, enabling business owners to fully focus on their new project once the old firm is closed. It provides peace of mind, as the business owner is relieved of the burden of potential penalties or fines resulting from non-compliance.
The statutory compliance requirements and management of an LLP, stemming from its initial company registration, can become burdensome and costly for an entrepreneur. If the LLP is not generating substantial profits, it is advisable to proceed with the LLP closure process.”
By closing the LLP, the distinction between general and limited partnership is eliminated, with the same party managing the essential aspects of the newly formed company. This eradicates the division between the general and limited partnerships.
LLP closure provides the benefit of being free from compliance obligations, as there is no need to track compliance once the company is dissolved. Furthermore, initiating the closure process relieves the company from concerns about penalties or fines in case of non-compliance.
Closing down an LLP also brings a halt to any ongoing legal actions once the company ceases its operations.
Ultimately, by closing the LLP, the business owner can redirect their financial resources, time, and energy into the new project, allowing for profitability and minimizing additional expenses related to the old company.
The decision to dissolve an LLP may be made for a variety of reasons, including inactivity or non-operation, closure of the LLP’s business, the death of important LLP personnel, a disagreement among the partners, etc. Understanding the many methods by which an LLP terminates is crucial first and foremost. The LLP must be closed under the LLP Act if you do not intend to file the return and do so for specific reasons. When it comes to opening or closing an LLP, Vakilsearch is a well-known brand to learn about Form 24 LLP Closure and LLP Closure Fees.
To dissolve your Limited Liability Partnership, you must submit Form 24 to the ROC together with declarations, indemnity bonds, and affidavits from each partner. Your LLP can be closed in 3 easy steps with our assistance at Vakilsearch:
- Step1: Complete the form, and we’ll respond to all of your questions on terminating an LLP business
- Step2: Professionals from Vakilsearch assist you in completing the overall end-to-end process
- Step 3: Within the specified time frames, a courier will deliver the requested documents to you.
The distinction between Striking Off and Winding Up
To get the LLP Closure Fees, find the differences between striking off and winding up.
Winding Off
During an NCLT winding off, the LLP terminates and cannot be revived in due course. The liquidator sells all of the LLP’s assets and uses the revenues to pay off the liabilities. Nobody is held responsible for the unpaid debts that were unable to be satisfied during the liquidation procedure as a result of the winding-up, which is final and brings the LLP to a stop for good.
Striking off
An LLP is struck off through a process that is based on the declaration of its partners; no professional liquidator is involved. The ROC has decided to remove the LLP’s name based on the partners’ affidavits of veracity and indemnity bond stating that they will be held personally accountable for any future liabilities of the LLP. The LLP was effectively closed as a result of the striking-off because there is no longer a compliance need. The LLP’s partners, however, continue to be personally liable for any unpaid taxes, government fees, or other liabilities that arise after the LLP is struck off. We suggest you resolve all differences, settle all accounts, and pay all debts before applying for striking off.
Fees
The LLP must be closed in compliance with the LLP Act if you have any explanation why you won’t be filing the return and closing it. Vakilsearch exhibits a fantastic and effective reputation regarding LLP registration of Termination.
If all filings are successful, the termination of an LLP should cost little more than ₹5,000 to ₹10,000. This covers creating application charges, submitting application charges, creating affidavits, statements of assets and liabilities, document surrenders, and all other compliances.
The government charges ₹500 for submitting Form 24. LLPs who fail to file any required statutory return are subject to a daily fine of ₹100 with no upper limit.
Step-by-step Procedure for Filing a Request to Dissolve the LLP
Here is the step-by-step procedure for filing a request and get the LLP Closure Fees.
You must submit Form 24 to the ROC, along with declarations, indemnity bonds, and affidavits from each partner, to close your Limited Liability Partnership. You can easily close your LLP with the help of Vakilsearch. Form 24 must be filed in the manner described below to close an LLP:
Stop Commercial Activities
Only LLPs that have either stopped doing business or have never started it can file an LLP Form 24. Therefore, if the LLP is already in operation and the promoters want to close it, the LLP must first stop all business operations.
Closing Bank Accounts
Only LLPs without creditors or an open bank account are eligible to file LLP Form 24. Thus, any bank account opened in the name of the LLP must be closed before LLP Form 24 may be submitted, and the Bank must provide a letter attesting to the closure of the LLP-named bank account.
Prepare Declarations and Affidavits
The Limited Liability Partnership must first submit an affidavit, whether jointly or severally, stating that it has not started doing business or that it ceased doing a commercial activity. Additionally, the LLP Partners must certify that the LLP is free from any debts and protect the LLP against any liabilities that might develop even after the LLP’s name has been removed from the Register. When employing Form LLP 24, the detriment of the Partners would not be eliminated even after the LLP was closed.
Organise Documents
The LLP deed and income tax return must be enclosed with Form LLP 24. If the LLP has not conducted any business activities and has not filed any income tax returns, then it is not necessary. If not, the application to close the LLP must also include a copy of the acknowledgment of the most recent income tax return submitted.
Fill out any Pending Paperwork
Within 30 days of registration following LLP incorporation, the LLP agreement must be submitted to the MCA. LLP agreements that have been entered into but not yet filed, as well as any revisions, must be filed if this compliance was overlooked.
Before submitting LLP Form 24, any unfiled Form 8 and Form 11 returns that are past due up to the end of the fiscal year during which the limited liability partnership ceased to conduct business or commercial operations must also be done so. The Limited Liability Partnership ceased conducting its revenue-generating business on the date of closure of LLP, the commercial operation, and any transactions that took place after that date—such as those in which money was received from debtors or paid to creditors, will not be considered revenue-generating activities.
Submit LLP Form 24
The name of the LLP can then be removed by submitting Form 24 to the MCA. After reviewing the application, if it is deemed valid, the appropriate Registrar of Companies will arrange for a notice notifying the striking off of the LLP to be posted on the MCA website.
Elimination Of LLPs Name
After a month, the Registrar of Companies will formally close/dissolve the LLP by removing its name from the register and publishing a notice in the Official Gazette.
FAQ
What is the closure of LLP and how can it be closed?
If the LLP intends to shut down its business or if it remains inactive for a period of one year or longer, it has the option to submit a request to the Registrar. The purpose of this application is to declare the LLP as defunct and have its name removed from the Registrar's list of LLPs.
Which LLPs can file for the LLP closure Scheme?
Rule 37 of the Limited Liability Rules, 2009 pertains to the process of removing the name of a Defunct LLP. The term ‘defunct’ refers to LLPs that are inactive or no longer in operation. Therefore, it is mandatory for an LLP to be defunct for a minimum of one year prior to applying for closure.
How to close a LLP which is inoperative and not having any business
In order to initiate the closure of an LLP, it is necessary to submit an application accompanied by the consent of partners and creditors, an indemnity bond, a statement of assets and liabilities, proof of income tax return acknowledgment, a resolution, and other relevant documents.
What is the procedure to remove a LLP name from the register of ROC?
The company can commence the procedure of erasing its name from the register of companies by submitting Form STK-2. According to the Companies (Removal of Names of Companies from the Register of Companies) Rules, 2023, the application must be accompanied by Form STK-2 and a fee of ₹ 10,000.
Conclusion
Thus, you might have known the LLP Closure Fees. Within 30 days of the resolution’s passage, the company’s directors must file a petition to close the LLP with the Registrar of Companies. Statements of assets and liabilities from the date of the LLP’s winding up, as verified by at least two partners, must be submitted within 15 days of the resolution’s passage. Closing an LLP is a serious choice, but it should be done carefully because the consequences could be large. Vakilsearch’s specialists can help you with this.
The most dependable and custom legal and compliance solutions are provided by Vakilsearch. According to the registrar’s department of the subsequent authorization petition, the entire process to close an LLP in India could take anywhere between 3 and 6 months. To dissolve your LLP in India, Vakilsearch can offer a comprehensive strategy in just three easy stages. Reach out to the professionals at Vakilsearch, and we’ll assist you in closing your LLP. You are just a phone call away, our team of experienced business advisors and legal professionals, from the best in legal services, are ready to help you at any time of the day or night.
