How can I close my business running in the name of LLP?

To avail the hybrid benefits of Corporate Body and Partnership firm, an entity known as Limited Liability Partnership is introduced by Limited Liability Partnership Act, 2008. None organization structure is left without any set-backs or limitations. Hence, considering the limitations the Partners of LLP may look forward for discontinuation of the LLP.

An ambiguous or puzzled decision by the co-founders during Online LLP Registration may also lead to unforeseen shutdown of the business. One of the prime reasons for discontinuation of an LLP is non-functioning after the incorporation of the Limited Liability Partnership.

Limited Liability Partnership Act, 2008 prescribed method of discontinuation of LLP under two main heads as listed below:

1. Declaring the LLP as defunct
2. Winding up of LLP
   1. Voluntary Winding up
   2. Compulsory Winding up

Procedure for Closure of business in name of LLP is simplified by following certain conditions under the Act. In the said procedure, which we are discussing in this article is an LLP can be declared as defunct and an application is required to be filed with Registrar of Companies (LLPs) in this regards.

Declaring LLP as defunct

In case the Partners have not carried on any Business Activity in the name of LLP for a period exceeding One Year from incorporation and registration of LLP or post incorporation, the LLP can make an application for striking-off its name by furnishing requisite form and documents in manner provided under the Act.

The Registrar, on receipt of the application, shall verify and review the documents. When the application is found satisfactory to the registrar, the Registrar may declare the LLP as defunct and remove the name of LLP from the Register of the Limited Liability Partnerships.

Who can make an application?

Any Limited Liability Partnership (LLP), which has

1. Not commenced any operations or commercial activities since incorporation of LLP and the period of one year has already passed; or
2. The LLP has initiated the operations post online LLP Registration and afterwards has ceased the commercial operations for a period of one year or more.

Eligibility Criteria:

In case, the Partners of the Limited Liability Partnership are looking forward to discontinue the status of LLP under this route, the test of eligibility shall be once confirmed before proceeding.

Checklist:

1. Whether commercial activities or operations of the LLP have ceased for a period of one year or more?
2. Whether Annual Compliance Requirements are complied with for the period up to which the operations were carried on?

Check fulfillment of both conditions:

• Fulfilled: The Partners can now file the application for strike-off by following the procedure prescribed under the Act and Regulations as explained in details in the article.
• Non-fulfillment: 

First Condition: Cessation of Operations:

The date of cessation of commercial operation is the date from which the Limited Liability Partnership has stopped to carry on its revenue generating business and any other 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.

Where the first condition is not fulfilled, the LLP cannot proceed with this option for closure under this route. In given case, the LLP may either follow the procedure of voluntary winding up or the LLP may wait for passing of period of one year from cessation of operations.

Second Condition: Annual Compliance Requirement:

The annual compliance requirements shall be complied with by the responsible Partners of LLP by filing of Form 8 and Form 11 on MCA portal for all the financial year(s) up to which the operations were carried on in the name of Limited Liability Partnership.

In addition to fulfillment of above conditions, it is to be noted that the application made in e-form 24 (application for declaring LLP as defunct) shall not be processed by the Registrar, if any other e-form in connection of the said LLP is pending for approval or for payment of. Hence, the Partners shall wait for approval of all the previous applications made in connection of the concerned LLP.

Pre-Requisites:

Once the Limited Liability Partnership is considered as eligible as per the grounds mentioned in the Eligibility Part of this article, the Partners of the LLP shall first ensure fulfillment of following requirements with the application of strike-off of the Limited Liability Partnership.

1. Closure of Bank Account: In order to file the application under this method, the bank account, if any is opened in the name of LLP shall first be closed. Further, the Partners shall obtain a letter from the bank evidencing closure of the bank account in the name of the LLP.

2. Obtain Consent of Parties:

• Consent of all the Partners to be conferred in written in order to make an application for strike-off.
• The written consent for the strike-off to be obtained from the creditors of the LLP. In case, there is no creditor in the said LLP then a certification shall be provided that the LLP does not have any creditor.
• Where the LLP is registered with any Regulatory Authority such as RBI, SEBI, etc., a No Objection Certificate from the said regulatory shall also be obtained in order to make an application in this regards.

3. Authorization for application: To make an application for the stated purpose, an authorization to any of the Designated Partners shall be given. The authorization can be given by passing resolution in this regards in the meeting of Partners of the Limited Liability Partnership.

4. Preparation of Statements: A Statement of Assets and Liabilities shall be prepared, which is duly certified as true and correct by the auditor or Chartered Accountant in Practice. The statement of accounts shall disclose NIL Assets and NIL Liability. The statement to be furnished shall not be earlier than thirty days of the filing of application of strike-off by LLP Form 24.

5. Income tax Return: While making the said application, an Income Tax Return shall be filed and an acknowledgement of latest Income Tax Return shall be furnished to the. However, the requirement may not arise in case the LLP has not commenced any operations or activities since the Online LLP Registration.

6. Statement of undertaking or indemnity bond:

• The Partners of the LLP shall furnish indemnity bonds which ensure the indemnity of any person having legal claim after the strike-off.
• In addition to same, duly sworn Affidavits shall be provided declaring all the information provided and statements given to be true, from all partners jointly or severally.
• The liability of the Partners would not be extinguished even after closure of a LLP while using Form LLP 24.

Procedure involved:

• The applicant shall file LLP Form 24 with MCA through online portal with the requisite documents as required. (Read below about the supporting documents to be furnished)
• Where the LLP is registered with regulatory authorities, as may be applicable, an NOC (No Objection Certificate) from the concerned authority shall also be required to be filed.
• The registrar shall publish the content of the application filed by the LLP on its website for a period of One Month for information to general public and receive the representation on the same.
• On expiry of the period specified above, where no reply or representation is received, the Registrar on satisfying himself for sufficient cause for closure of the LLP may pass an order to strike-off the name of the LLP from the Register of the Limited Liability Partnership.
• Upon approval of the said application, the status of the concerned LLP shall be changed to 'Struck off (defunct)'.

The list of documents to be furnished mandatorily for supporting the application is provided below:

• Copy of detailed application: The details contain the particulars of the LLP along with the reason for the closure of LLP.
• Copy of authority to make the application (as explained above);
• Copy of consent of all partners (explained above);
• Copy of consent of all creditors (explained above);
• Copy of the undertaking/ indemnity bond for striking off name (explained above);
• Copy of statement of assets and liabilities duly certified as true and correct by auditor/ Chartered Accountant in practice (explained above);
• Copy of acknowledgement of latest Income tax return (explained above);
• LLP Agreement along with any modifications made therein;
• Any other information can be provided as an optional attachment

Requirement of appointment of Auditor dose not arise while making an application under this route for strike-off of the name of LLP as required in case of winding-up of LLP.

Furthermore, appointment of practicing professional is required in order to prepare a detailed application for strike-off providing the grounds for justification along with preparation of financial statements and requisite documents as applicable in such cases.

Bottom Line:

In order to maintain the active status of the LLP (Limited Liability Partnership), compliance with annual filing requirement shall be fulfilled from time to time. Apart from filings of the same, various returns filing under tax registrations such as GST Registration and any other law as applicable shall be complied with regularly. Where your LLP is non-functioning LLP, the partners shall better close the LLP under this route instead of bearing this cost after compliance of non-functioning LLP. The way prescribed here is one of the ways to close your Limited Liability Partnership and struck-off the name of LLP from register of LLPs to save the entrepreneurs/ partners to be declared as disqualified due to non-compliance of various provisions, as may be applicable and provided under Act(s).

Procedure of Winding up of LLP can also be followed to close business under LLP which may be opted when Application under this method is not possible or applicable. We shall discuss about the procedure for winding up in our upcoming article.

The author is co-founder at online Legal Service Provider, LegalWiz.in. He can also be reached at support@legalwiz.in for striking-off of your Limited Liability Partnership and other personalized solutions. Professionals at LegalWiz.in are happy to help you!