A Limited Liability Partnership (LLP) is a form of business registration where some or all the partners have limited liabilities. It is a form of business registration where the relationship between LLP partners is governed by private agreement. LLP has a benefit of limited liability similar to company registration but LLP is taxed at a higher income tax rate.

Since it is registered or created by law, therefore it can be closed by the procedure established by the statue only. There can be many reasons associated with the closing of any business like non-operation, recurring losses, increased debts, a dispute among partners, the passing of a key managerial person, etc. Closing or Winding up os an LLP can be a challenging task where the partners must first decide on the method that is available under the LLP Act 2008, for winding up of the LLP. Recently Ministry of Corporate Affairs has amended Limited Liability Partnership Rules 2009, by introducing Limited Liability Partnership (Amendment Rules) 2017. With this amendment LLP Form 24 has been introduced by the MCA and it is now easy to close LLP by making an application to the registrar for striking off the name of LLP. Starting a business in form of LLP or company registration is relatively easy as compared to its closure. The following procedure should be followed in case of closing of LLP by filing Form 24:

• Termination of Commercial Activity: LLP Form 24 can only be filed by only those LLPs that have never commenced any business operations or have ceased the ongoing commercial activity. Therefore, if the LLP is operational and the partners wish to wind up the LLP then they first need to cease the commercial activities of the LLP.
• Close Bank Accounts: Form 24 can be filed only in case of nil creditors and all bank accounts opened in the name of LLP must be closed. The designated partner need to approach the bank with a request to close the bank account and obtain a closure certificate from the bank that the account opened with them is closed.
• Affidavits and Declaration Preparation: Every partner of the LLP should execute the facts of declaration, either jointly or separately so that the LLP ceased to carry forward commercial activity from the date or has not begun any business. Also, the partners must declare that there is no liability. The Partners Liability shall not be stopped even after the closure of an LLP; while processing through Form LLP 24.
• Prepare Documents: With the LLP 24, the income tax return statement of the LLP and the LLP’s deed must be submitted. In case, the LLP has not filed the income tax returns and it has not processed any business activity, then the income tax return statement process shall not be needed.
• Filing of all pending documents: After the incorporation of LLP, the agreement should be filed with respective MCA within 30 days of registration. Any overdue return in Form 8 and Form 11 up to the end of the current financial year in which LLP ceased to take a move on its commercial operations or business must be filed on or before filing the LLP Form 24.
• Obtain a CA Certificate: Once the mandatory documents for filing the LLP Form 24 is prepared, an account statement disclosing zero assets and zero liabilities, that is authorized by a Chartered Accountant to date not earlier than 30 days of the Form 24 filing date must be obtained.
• File LLP Form 24: All the mentioned documents along with the LLP Form 24 must be filed with the MCA to strike off of the name of the LLP. While processing the application; found any acceptable, the concerned Company’s Registrar will send a detailed notice to be published on the MCA website announcing the name removal of the LLP

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About Author

CA Sundram Gupta is a Chartered Accountant and forensic auditor having 10 years of experience in the field of Auditing, GST, Income tax and Accounting. He has given consultation to distinct industries over these years.

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