LLP Closing Procedure

LLP Closing Procedure

The penalty for LLPs defaulting in filing of any statutory return is Rs.100 per day, without any maximum limit. Hence, it is often best to windup dormant LLPs so that there is no requirement to file LLP Form 11, LLP Form 8 and Income Tax Return for the LLP each financial year to maintain compliance and avoid penalty.
Before the introduction of the Limited Liability Partnership (Amendment) Rules, 2017, the procedure for winding up an LLP used to be long and cumbersome. However, with the introduction of LLP Form 24, the procedure has been made easy and simple.
Hence, its best for Entrepreneurs having dormant or defaulting LLPs that are accruing penalty to use this opportunity to close the LLP.

Procedure (Filing LLP Form 24)

Filing LLP Form 24

  1. Step 1: Cease Commercial Activity
  2. LLP Form 24 can be filed only by LLPs that never commenced business or have ceased commercial activity. Hence, if the LLP is operational and the promoters wish to close the LLP, the LLP must first cease all commercial activity.
  3. Step 2: Close Bank Account(s)
  4. LLP Form 24 can be filed only by those LLP that have no creditors and no open bank account. Hence, prior to filing LLP Form 24, any bank account opened in the name of the LLP must be closed and a letter evidencing closure of the bank account in the name of the LLP must be obtained from the Bank.
  5. Step 3: Prepare Affidavits & Declaration
  6. All the Designated Partners of the LLP must first execute an affidavit, either jointly or severally, that the Limited Liability Partnership ceased to carry on commercial activity from (Date) or has not commenced business. Further, the LLP Partners must also declare that the LLP has no liabilities and indemnify any liability that may arise even after striking off its name from the Register. The liability of the Partners would not be extinguished even after closure of a LLP while using Form LLP 24.
  7. Step 4: Prepare Documents
  8. Along with Form LLP 24 the income tax return of the LLP and LLP deed must be enclosed. In case the LLP has not filed any income tax return and it has not carried on any business activity, then it is not required. Else, a copy of the acknowledgement of the latest Income-tax return filed must be attached with the application for closing the LLP.
  9. Step 5: File Any Pending Documents
  10. After incorporation of an LLP, the LLP agreement must be filed with the MCA within 30 days of registration. In case this compliance was missed and LLP agreement was not filed, then the initial LLP agreement, if entered into and not filed, along with any amendments must be filed. Also, any overdue returns in Form 8 and Form 11 up to the end of the financial year in which the limited liability partnership ceased to carry on its business or commercial operations must be filed before filing LLP Form 24. The date of cessation of commercial operation is the date from which the Limited Liability Partnership ceased to carry on its revenue generating business and the transactions such as receipt of money from debtors or payment of money to creditors, subsequent to such cessation will not form part of revenue generating business.
  11. Step 6: Obtain Chartered Accountant Certificate
  12. Once all the documents for filing of LLP Form 24 is prepared, a statement of accounts disclosing NIL assets and NIL liabilities, that is certified by a practising Chartered Accountant up to a date not earlier than thirty days of the date of filing of Form 24 must be obtained.
  13. Step 7: File LLP Form 24
  14. The above mentioned documents along with LLP Form 24 (Download LLP Form 24) can be then filed with the MCA to strike off name of LLP. On processing the application, if found acceptable, the concerned Registrar of Companies would cause a notice to be published on the MCA website announcing the striking off of the LLP.

FAQ's

To add or remove a partner from LLP, the consent of other partners must be obtained, which is followed by a change in the LLP Agreement and application to MCA to approve the changes. The application to MCA must be filed within 30 days of effective date of the change.

Yes, an existing partnership firm can be converted into LLP by complying with the Provisions of clause 58 and Schedule II of the LLP Act. Form 17 needs to be filed along with Form 2 for such conversion and incorporation of LLP.

Usually, if you are a director (or acting as a director), you are not personally liable for paying the company's debts. This means thaIn case of an LLP in which all the partners are bodies corporate or in which one or more partners are individuals and bodies corporate, at least two individuals who are partners of such LLP or nominees of such body’s corporate shall act as designated partners.

In case of an LLP in which all the partners are bodies corporate or in which one or more partners are individuals and bodies corporate, at least two individuals who are partners of such LLP or nominees of such body’s corporate shall act as designated partners.

The Companies Act, 2013 mandates minimum 4 Board Meeting every year with a maximum gap of 120 days between 2 Board Meetings. There is no such requirement under the LLP Act. Similarly, holding of Annual General Meeting (AGM) is mandatory for Companies whereas there is no such requirement for LLPs.

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