Guide To Closing an LLP in India

Closing a defunct or inactive LLP is a straightforward process, especially if you follow the rules. This guide will walk you through the steps to officially “strike off” your LLP’s name from the official register, giving you the peace of mind you deserve.

What Happens If You Don’t Close an LLP?

Think of it like this, your LLP is like a car you’ve registered with the government. Even if you never drive it, you still have to pay the annual fees and get it checked. In the same way, an LLP is required to file certain forms every year, like Form 8 and Form 11, under the Limited Liability Partnership Act, 2008.

If you miss these filings, you could face a daily penalty of ₹100 per form and there’s no upper limit! This can add up to a huge amount over time. The government’s goal is to keep the official records clean and up-to-date, so they take non-compliance seriously.

Are You Eligible for a Quick Closure?

Before you start the process, you need to make sure your LLP is a good candidate for this “strike off” method. You can’t just close an active, profitable business this way. Your LLP must meet these conditions:

• No business for at least one year: The LLP should either have never started business since its incorporation or should have stopped all business operations for at least the last year.
• No assets or liabilities: All your LLP’s bank accounts should be closed and it should have no outstanding debts or liabilities.
• All partners agree: You need the consent of all the partners to go ahead with the closure.

Your Step-by-Step Guide to Closing an LLP

Closing your LLP is a methodical process. Here’s a breakdown of the steps you’ll need to follow:

1. Get Your Ducks in a Row: First, make sure you have all the necessary documents. This includes the LLP Agreement, PAN card and address proofs of all partners. You’ll also need a bank account closure certificate.
2. Clear All Dues: Pay off any outstanding debts or statutory dues. If you have any creditors, get a “No Objection Certificate” (NOC) from them.
3. File Any Pending Returns: This is a crucial step. You must file all overdue returns, like Form 8 (Statement of Account & Solvency) and Form 11 (Annual Return), with the Ministry of Corporate Affairs (MCA).
4. Prepare the Final Documents: You’ll need to create a Statement of Accounts showing “nil assets and nil liabilities” for the LLP. This document must be certified by a practicing Chartered Accountant and should be prepared no more than 30 days before you file the closure application.
5. Draft Legal Declarations: All designated partners will need to sign an affidavit and an indemnity bond. These are legal promises that the LLP has no assets or liabilities and that the partners will be personally responsible for any future liabilities that may arise.
6. File the Application: Once all the documents are ready, you will file Form 24 with the Registrar of Companies (ROC) on the MCA website. This is the official application to strike off the LLP.
7. Wait for Confirmation: The ROC will review your application and publish a notice on the MCA website. This notice gives the public a chance to raise any objections. If no objections are received within the stipulated time, the ROC will officially strike off your LLP’s name. You’ll be notified of the final closure.

FAQs

Q1 What’s the difference between “strike off” and “winding up”?

Striking off is a simpler, faster method for closing an inactive LLP with no assets or liabilities. Winding up is a more complex process for active or solvent LLPs that have assets to sell and liabilities to pay. The latter involves appointing a liquidator and is often handled by a tribunal.

Q2 Can I close my LLP if it has been inactive for only six months?

No. An LLP must be inactive for a continuous period of at least one year to be eligible for a voluntary strike off.

Q3 Do I need a lawyer to close my LLP?

While not mandatory, it’s highly recommended. The process involves specific forms, legal declarations (affidavits and indemnity bonds) and adherence to strict deadlines. A professional can ensure all documents are correct and the process is completed smoothly, saving you from potential penalties and delays.

Q4 Will I be liable for any debts after the LLP is closed?

Yes. The indemnity bond you sign means that even after the LLP is struck off, you, as a designated partner, will remain personally liable for any future liabilities that may arise.

Conclusion

Leaving an inactive LLP hanging is like keeping a ghost in your closet. It will eventually come back to haunt you with penalties and compliance issues. The LLP closure process is designed to give you a clean and hassle-free exit. By properly following the steps to strike off your defunct LLP, you not only avoid future legal troubles but also free yourself up to focus on your next big venture!

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