Closure of Inactive LLP

An inactive LLP can make an application to the Registrar with the consent of all Designated partners for striking off its name from the register. Our dedicated team will help you with all the documentation. We extend our support from documentation to preparation and filing.

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Closure of Inactive LLP In India

LLP is a legal entity separate from its partners and formed under the Limited Liability Partnership Act, 2008. LLP continues to exist until its formal closure filed as stipulated under the LLP Act.

LLP is required to file annual returns, whether it does the business or not. Non- filing of due returns will attract penalties and prosecution under the Limited Liability Partnership Act, 2008 and all the designated partners are liable for the consequences. Cessation of operation can not be a reason for non-filing of returns. It is mandatory to close the LLP to be free from compliance burden & Move on in Life.

Reasons for dissolution of LLP in India

To avoid compliance and filing responsibilities

As per provisions of Limited Liability Partnership Act, 2008, Every LLP (Limited Liability Partnership) is required to file annual returns for each financial year, whether it does the business or not. Cessation of operation can not be a reason for non-filing of returns. If the LLP is inactive, it’s better to wind up than fulfill the compliance and avoid the yearly compliance burden.

To avoid fines and penalty for late filing

Non-filing of annual returns will attract penalties and prosecution under the LLP Act, 2008. The penalty for non-filing of Annual Return is Rs 100 per day and the penalty for non-filing of Income-tax return the LLP is punishable with a fine of Rs. 25,000 as a minimum which can go up to Rs. 5,00,000 and each designated partner is punished with a minimum fine of Rs. 10,000 which can go up to Rs. 1,00,000.

LLP Closure – Requirement

The closure of LLP can be done only with the process prescribed under law. Section 63 of the LLP Act provides that an LLP can be closed

Voluntarily or
By NCLT upon an application moved by the LLP or The ROC.

The rules made for closure provides an easy method of closing of an LLP that is inactive by filing an application in Form 24. However, only if the following conditions are satisfied;

That the LLP has never started its operations or
That the LLP does start the business or is not carrying any business for the immediate past one year
That all taxes and returns have been filed
That there is no Assets or Liabilities in the LLP
That in case there are assets or liabilities then the same is settled before application of closure is filed

An LLP fulfilling the following conditions can make an application to Registrar for striking off its name from the Register of LLP.

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FREQUENTLY ASKED QUESTIONS

What is defunct LLP?

A defunct LLP means an LLP that has never started any business or is not carrying on any business activity for the immediate past one year.

My LLP has done a small business in the last year. Can it be closed?

LLP can be closed if it is inactive for a period of one year immediately preceding the filing of the application. In your case, you have to wait for the one year from the date of last business transaction.

Who will sign the application or e-form 24 for LLP closure?

Any of the designated partners can digitally sign the e-form 24 for the closure of the LLP with the consent of all partners. However, all the designated partners are required to execute indemnity and affidavits as stipulated under LLP Rules.

Should all the partners’ consent is required to close the LLP?

Yes, consent of all the partners is required to make the closure application.

There are few assets and balance in the bank account. Can it be closed?

If there are assets and balance in the bank account, the LLP cannot be closed as defunct. There should be no Assets or Liabilities in the LLP.

Is there any certificate issued by Registrar after the closure of LLP?

No. Registrar will not issue a certificate for the closure of LLP. After scrutiny of the application, the Registrar will approve the application form. The status of LLP will be changed to ‘under the process of striking off’ and then defunct.

How long will it take actually to strike off the LLP name?

Depending on the Registrar’s office, the whole process may take 3 to 6 months to complete. After approval of the application, details will be placed on the Ministry of Corporate Affairs portal for the information of the general public for a period of one month. After the expiry of one month, the Registrar will issue an order for striking off the LLP.

Can we close LLP within one year from the date of incorporation?

No, at least one year must have elapsed before closing an LLP voluntarily.

Can the apply for LLP closure, without filing Form 8 and Form 11 for past years?

No, all overdue (Form 8 & Form 11) returns should be filed for each financial year in which the LLP is active and carrying business.

Is there any proof or Attachment are required if LLP does not hold any bank account?

No such attachment or proof is required if there is no bank account for LLP. However, designated Partners give a declaration in the affidavit for the same.