Ways to strike off of Limited Liability Partnership
Table of Contents
Ways to strike off of Limited Liability Partnership
Meaning of LLP?
LLP is called as Limited Liability Partnership, it’s a combination of Partnership & Corporation. LLP is a new structure of Business which provides the flexibility of Partnership with advantage of Limited Liability to the company at minimum compliance cost.
Benefits/Features of Limited Liability Partnership (LLP)
- A Separate Legal Establishment having Limited Liability: LLP is different from its partners/partners and is also separate from its firm. If any firm meets with heavy losses then no one can touch their Individual property. In case of any loss in business only the amount that they have invested in it will be vanished. Liabilities of all the partners are limited and in proportion to their share in the capital. Moreover, all the partners are the agents of the LLP but not the agents of other partners in the LLP.
- Perpetual Existence: LLP also has permanent existence, which means if any of the partners dies or go bankrupt; the company will continue their business will not be dissolved.
- Without Maximum Partners Limit: In LLP there must be at least 2 partners and one of them should be a citizen of India. There is no limit for maximum partners. Foreign partners are also allowed in LLP.
- Establishment for Profit only: A LLP cannot be a non-profit establishment. It will be formed only for profitable business purposes.
- Easy Formation: For the formation of new LLP all the partners are required to visit the Registrar of Companies (ROC) office and sign the Limited Liability Partnership agreement.
- Flexibility: LLP offers the adaptability for making changes. It allows all the partners the flexibility of organizing their internal management on the basis of the mutual agreement, as in the case of a partnership firm.
Moreover, LLP is less costly to start with minimum compliances and it is so easy to liquidate as it requires less legal formalities. The partners cannot be held responsible for other partners’ misdeeds, frauds, etc.
Course of action for striking off of Limited Liability Partnership
Striking off of Limited Liability Partnership is governed by the Rule 37(1) of LLP Rules, 2017. There are two processes for striking off the LLP is as follows:
Compulsory Strike off of LLP by Registrar
When an LLP is not carrying on any business or operations from the past 2 years or more, then the Registrar can send notice to LLP and all the partners for striking off the LLP. Post notice all the partners will be given a time of one month to file their presentation, if any.
Self- discretionary or Voluntary Strike off of LLP by Partners
When an LLP has not been doing any business or functioning from past one year or more and they wants to close down their business then the LLP can apply to the Registrar for declaring that LLP as non-functioning and to remove their name from Registers of LLP.
List of documents for striking off of LLP:
For Striking off the Limited Liability Partnership name, an application is required to be made in e-Form 24 with following documents:
- Authority duly signed by all the partners for making the Application.
- Latest Income Tax Return acknowledgement
- Detailed Application mentioning the full details of Limited Liability Partnership and the reasons for closure of LLP.
- A statement of account stating Nil Assets & Nil Liabilities which is to be certified by a Chartered Accountants in practice. All the details and information made should be up to a date not more than 30 days of the date of filing of Form 24.
- Initially executed Limited Liability Partnership agreement, if entered into along with subsequent agreement with changes, if any.
- Filling of duly signed affidavit by all the designated partners, either jointly or severally.
Principal Requirement for LLP to go for Striking off
- LLP must have completed all ROC filings till date of making an application for striking off.
- Limited Liability Partnership must be non-operative at least for last one entire financial year.
- LLP must have not any debt unpaid.
Process /Activities for LLP striking off
Below are the Process /steps required to be followed for striking off a Limited Liability Partnership:-
- Call Meeting of all the LLP Partners
- Limited Liability Partnership will call the meeting of all the partners and pass the resolution for striking off of the LLP and authorize any of the partners to take the actions on behalf of all LLP partners regarding filing of application with ROC
- Many Checks needs to be done before filing application
- Cease/ Breaking off commercial activities: Form 24 has to be filled by those LLPs only which wants to close their business permanently. In case if the LLP which is operational and its promoters wants to close the LLP then they have to close all its commercial activities before filling the form 24.
- Bank accounts closure: prior to filling form 24 an LLP has to close all its Bank accounts which are on its own name & has to obtain a document manifesting that the Bank A/c has been closed permanently.
- Then needed to make Affidavits & Declarations: The LLP’s designated partners must declare, jointly or severally, that the LLP has ended all commercial activity as of the date or has not started any business in the past year. They must also state that their LLP is free of all liabilities and creditors, as well as any indemnification obligations that may arise after the strike off.
- Filing of Application with LLP ROC
A Limited Liability Partnership needs to file an application (Form 24) with Registrar of LLPs for striking off of the LLP along with following mentioned documents:
What are the Attachments of Form 24
-
- Statement of Accounts duly certified by practicing CA which shall not be older than Thirty days from the date of application.
- Acknowledgement copy of latest ITR filed.
- Closure Certificate of Bank Account, if any.
- Duly signed consent of Partners/Resolution for closure of LLP.
- Affidavit declaring that there are no creditors/liability
- Indemnity Bond and Affidavit for Closure of LLP
- Last one is Verification & Confirmation by ROC
LLP ROC will verify all the documents presented by LLP and if there is NOC or No objection raised by the ROC then they will strike off the LLP and will be intimated via e-mail.
Frequently-Asked Questions for Striking off of LLP
1. Is it compulsory to complete the annual filings of Limited Liability Partnership before applying for striking off of LLP?
Ans. As per the provisions of Limited Liability Partnership Rules, LLP has to file the forms LLP-8 and LLP-11 up to the end of FY till it was business is continue operating.
2. Is form LLP-3 regarding the Limited Liability Partnership Agreement should be filed before striking off of LLP?
Ans. Limited Liability Partnership Act or rules doesn’t provide any exemptions regarding the filing of Limited Liability Partnership Agreement in form LLP-3
3. What should I do if the LLP has not yet opened a bank account? Is it still necessary to file Form 24?
Ans. Yes, LLPs can file Form -24 if they haven’t created a bank account. They must include a declaration from all partners stating that they haven’t opened a bank account.
- Preparing documents: An LLP along with the form-24 must enclose the income tax return and LLP agreement deed. A acknowledgment of latest ITR is needed to be attached with the application of strike off.
- Filling of any pending documents : Post incorporation of an LLP, a LLP agreement must be filled with MCA within 30 days of registration ,if that it enters to that agreement and is not filled at that time then before filling of form-24 that agreement must be filled with amendments, if any.
- Also all the pending overdue returns in form-8 or form-11 up to the end of financial year in which the LLP ceases to its business activities must be filled before filling of form-24.
- Getting Certified from Chartered Accountant: After preparing all the documents for filing of LLP Form 24 a statement of accounts stating nil assets and nil liabilities, that is duly signed & certified by a practicing Chartered Accountant up to a date not earlier than thirty days of the date of filing of Form 24 must be obtained.
- Filling of Limited Liability Partnership form 24: The above mentioned documents along with Limited Liability Partnership Form 24 can be then filed with the MCA to strike off the name of LLP. At the time of processing the application, if all documents are acceptable, the concerned RoC would issue a notice to be published on the Ministry of Corporate Affairs website announcing the striking off of the LLP.
KEY NOTE: After using form-24, the liability of designated partners will not be extinguished even after the Strike off of Limited Liability Partnership.
By Manish Kumar Singh
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