Closing a Limited Liability Partnership India

Closure of LLP, if it has not commenced business or is not engaged in the activity of business for the last 1 year. The closure application needs to be filed with the mutual consent of all the partners of the firm.

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Closing a Limited Liability Partnership India

As LLP is a separate legal entity, it is created by following a legal proceeding hence when it comes to its closure there is a proper legal procedure to be followed.

An LLP may be closed through winding-up or through striking off its name from Register of LLP. The winding-up may be a costly or time-consuming affair for many LLPs as it includes approval from Tribunals and involvement of Liquidators. Therefore, the LLP that has been non-operative since its formation or for more than a year, may proceed the easy way of exit i.e. Strike-off. The LLP will be declared struck-off after the publication of notice by Ministry. Once it is struck-off, the LLP cease to be in existence in eyes of law.

Reasons for dissolution of LLP

To avoid compliance and filing responsibilities for the LLP’s which are not active.
The statutory compliances of maintaining an LLP are higher than the cost of winding up. If the LLP is dormant it’s better to wind up than fulfill the compliances.
To avoid fines and penalty for late filing, it is better to officially Wind Up LLP’s which are inactive.
All LLP registered India have to file the annual returns and statement of accounts for each Financial Year irrespective of annual revenue or profit disregard of its working. LLP that hasn’t opened a bank account or commenced business activity would have to file the following filings each year to maintain LLP compliance and avoid penalty.

Documents Required Closing a Limited Liability Partnership India

PAN Card
All partners are required to submit their and the firm’s PAN number as identity proof.
LLP Agreement along with any modifications made therein
Address Proof of firm
If the registered office place is rented, rent agreement and one utility bill (electricity bill, water bill, property tax bill, gas receipt etc.) have to be submitted. Also, NOC from landlord will be submitted.
Accounting Information
The financial statement of the LLP with Copy of acknowledgment of latest INCOME TAX RETURN.
NOC from Creditors
NoC for strike-off to be obtained from secured creditors, if any
Statement of assets and liabilities of the LLP certified as true and correct by auditor/chartered accountant in practice.

Closure of llp Process

Step 1: Resolution

A special resolution has to be passed by all or ¾’thof the partners of the company, agreeing to dissolve the partnership.

Step 2: Form No. 1

Within 30 days of passing the resolution, form no.1 is filed with the Ministry of Corporate Affairs (MCA) with a copy of the resolution

Step 3: No Debt Declaration

At least two members of the LLP have to declare that it has no debts or liabilities. Or if it does, it will be settled within one year from the commencement of winding up.

Step 4: Form 4 & Value of Assets

Form No. 4 along with a report of the value of LLP’s assets has to be submitted to the registrar within 15 days of filing the forms and a statement declaring that the LLP is not being closed to cheat anyone.

Step 5: Creditor Consent

The next step is to acquire consent from the creditors of the LLP, to wind up the business. For this purpose, at least ⅔’rd of company creditors have to provide consent.

Step 6 – Filing Form 6

Within 14 days of receiving consent from creditors, an advertisement has to be filed in the local newspaper. In case if the LLP has assets or liabilities, a liquidator is appointed and his/her statement needs to be filed using form 6.

Step 7: Filing Form 9

Prepare the LLP’s final account statement, and submit them along with form 9 to conclude all formalities.

FAQs on Closing a Limited Liability Partnership India

LLP Partners can be of various types. Some of the most common partners can be of following types –

  • Equal partners (1:1)
  • Differential Rights LLP partners
  • Husband and wife LLP
  • Differential Rights and Differential Powers LLP partners

The designated partner will have to fill DIR Form 3 and Form 4 and submit it with the authorities to get added in the designated partners’ list of an LLP in India.

There is no maximum limit of the number of partners for an LLP. A partner can be added anytime and a partner can leave the LLP whenever he wants to. However, there should be a minimum of two partners in an LLP to function.

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