Winding Up of Limited Liability Partnership (LLP)
A dormant LLP is suggested to be closed down in order to save the compliance cost and avoid penalties.
Digital Filings can help you in…:
Ascertaining the appropriate process to wind up an LLP
Accumulating required documents
Drafting affidavit and Indemnity bond
Filing closure application for approval
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Understanding Winding Up of LLP
LLP mode of business was originally introduced in Indian the year 2009 and later was amended in 2017. LLP is considered to be the most easy to manage business-model as it provide benefits of limited liability framework to its partners. If an entity is not engaged in any business activities or is inactive for a long time, then it is preferred to close down the business to save on the compliance costs and also to avoid any possible legalities or fines.
The procedure to be followed for winding up an LLP depends on specific reasons for the closure and current financial position of the business. It can be done in three ways as follows:
- Voluntary Winding Up – On receiving approval from at least 75% of partners along with a declaration for LLP’s inability to pay off all the debts in one year, the LLP can initiate winding up process.
- Striking Off –As per the amended law, Form 24 allows an LLP to get its name easily strike off from the register of authority by following up a simple procedure and submitting the Form to Ministry of Corporate Affairs (MCA).
- National Company Law Tribunal (NCLT) – Under the following circumstances, the authority can initiate the winding up process for an LLP:
- Less than two partners in a company for more than 6 months.
- LLP becomes incompetent to pay its debts
- LLP stops filing annual returns for five consecutive years
- LLP stops acting in sovereignty and integrity of the Constitution of India.
- NCLT justifies its discretion that it is fair to completely wind up the active company.
An LLP is an artificial person and is created by law. It is suggested to have thorough knowledge of the matter and follow the procedure as instructed by the judiciary for its closure.
Key Reasons for Winding Up an LLP
Compliance Relief
Irrespective of its no commercial engagements, an LLP is bound to pay annual compliance and regularly maintain its books to avoid penalties or legalities. All these statutory procedures consume a good amount of time and efforts which can be saved by closing down an inactive LLP.
Not as Planned
Business is full of uncertainties and things do not always turn out the way we plan. Therefore Expert Advisers @ Digital Filings suggest letting go any un-profitable venture and recommend business owners to put their efforts and money on some fruitful plans.
Instant and Hassle-Free
An LLP can be wound up easily with minimal procedural requirement and does not require a huge or complicated documentation. Overall, the LLP winding up process is not complicated task, thus it is always preferable to shut down a problematical or an inactive LLP before incurring heavy losses.
Compliance Cost
A business is obliged to file Income Tax Returns (ITR), Form 11, and Form 8 with the Registrar of Company (ROC) even in an inactive mode. Such legal formalities include compliance costs. Skipping these mandates will result in heavy penalties (as much as INR 100 for each day) or even certain legalities. Thus, to save this financial wastage, it is advisable to close down an inactive LLP.
Required Documentation Chart
Required Documents for Winding Up an LLP
Company Documents
- Scanned copies of all filed Income Tax Returns (ITR).
- Scanned copies of all filed returns with MCA
- Indemnity bond from all Partners
- An affidavit from all Partners
Financial Documents
- Scanned copy of the financial statement (NIL Liabilities and Assets)
- Scanned copy of Bank account closure approval
We are Glad to Help!
LLP is a creation of law and can be closed by established legal procedures. The reasons for shutting down an LLP could be various, however, the circumstances in which an LLP is being closed is what matters for deciding the process that needs to be adopted.
Do Not Worry!
Experts @ Digital Filings can proficiently assist an LLP to wind up its operations in an easy and economical way.
Pocket-Friendly Options
Basic
Package Include:
Winding up of an LLP having Two Partners with no Activity since Incorporation.- (Above price includes all taxes and relevant government fees.)
Standard
Package Include:
- Winding up of an LLP having Four Partners with no Creditors. (Above price includes all taxes and relevant government fees.)
Premium
Package Include:
- Winding up of an LLP having Four Partners with one Secured Creditors. (Above price includes all taxes and relevant government fees.)
How we Do It…
With complete support of existing members, an LLP can be wound up with ease in a maximum time frame of just two months. Partners @ Digital Filings can assist LLPs in cutting down troubles and smoothly managing the entire process.
Review, Compile, and Initiate
Before initiating the LLP winding up process team @ Digital Filings will first review the business activities to ascertain the appropriate procedure along with the compiling the supporting documents.
This Certificate is Critical
The bank account opened in name of the LLP at time of incorporation needs to be closed and a closure certificate is to be collected from the banker to initiate the wound up process.
Certifying Financial Statements
To wind up, the LLP also needs to acquire certified financial statements from a practicing auditor or a Chartered Accountant (CA). The financial statement must state the NIL assets and Liabilities of the firm.
Partners Consent
A partner’s meeting needs to be conducted to intimate and get approval for winding up the LLP. At least 75% of partners must give their consent in a prescribed LLP agreement format to start with the LLP winding up process.
These Legal Papers are Important
Post receiving the approval to wind up LLP, an affidavit is submitted by partners stating the reliability of disclosed information and documents. Along with the affidavit, an Indemnity Bond is also signed by the partners making them liable for any possible future debts.
Filing Closure Application for Attaining Approval
The closure application is submitted to the registrar along with required documents which are examined by the concerned authority. On satisfactory inspection, the authority will approve the application for winding up and the LLP will be closed within 3 to 4 months.
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