LLP Closure in India: Complete Procedure to Close LLP Using Form 24
Closing a business is often a more difficult emotional and administrative task than starting one. In India, a Limited Liability Partnership (LLP) that has remained inactive or has fulfilled its purpose must be formally dissolved to avoid escalating penalties and legal liabilities. The Ministry of Corporate Affairs (MCA) provides a streamlined procedure to close LLP through the “Fast Track Exit” mode.
If you are looking for a hassle-free way to exit, understanding the LLP closure procedure is vital. This guide, brought to you by LLP Registration Consultant – Startup Portal Business Service, breaks down the entire journey of filing Form 24 to ensure a clean legal exit.
What is LLP Closure?
LLP closure refers to the legal process of removing the name of a Limited Liability Partnership from the Register of LLPs maintained by the Registrar of Companies (RoC). It is the formal “winding up” of the entity’s legal existence. Unlike a simple “stop” in business operations, a formal closure of LLP ensures that the partners are no longer responsible for future statutory filings or compliance.
Reasons for Closure of LLP
There are several scenarios where partners might decide to opt for the procedure to close LLP:
- Dormancy: The LLP has not commenced any business activity since its incorporation.
- Ceased Operations: The business has stopped all commercial transactions for a period of one year or more.
- Lack of Profitability: The partners find the business model unviable and wish to cut further losses.
- Completion of Objective: The specific project or purpose for which the LLP was formed has been achieved.
- Partner Disputes: Mutual disagreement among partners leading to the decision to dissolve the entity.
Eligibility Criteria for Closing an LLP
Before you initiate the LLP closure through Form 24, you must ensure your entity meets the following legal prerequisites:
- Inactivity: The LLP must not have carried out any commercial activity for at least one year.
- No Assets/Liabilities: The LLP must have NIL assets and NIL liabilities. All creditors must be paid off before applying.
- Closed Bank Accounts: All bank accounts opened in the name of the LLP must be formally closed, and a closure certificate must be obtained.
- Annual Filings: All overdue annual returns (Form 8 and Form 11) must be filed up to the financial year in which the LLP ceased operations.
- Consent: Unanimous consent from all partners is mandatory.
LLP Closure Procedure
The LLP closure procedure is now processed centrally by the C-PACE (Centre for Processing Accelerated Corporate Exit) to ensure faster results. Here is the step-by-step roadmap:
- Pass a Resolution: Hold a meeting with all partners and pass a formal resolution to close the LLP and authorize a Designated Partner to file the application.
- Settle Dues and Close Accounts: Pay off all creditors, employees, and statutory dues (GST, Income Tax). Once the balance sheet is clean, close the LLP bank accounts.
- Prepare Statement of Accounts: Obtain a Statement of Assets and Liabilities certified by a practicing Chartered Accountant (CA). This statement must not be older than 30 days from the date of filing.
- Draft Affidavits and Indemnity Bonds: Every designated partner must execute an affidavit and an indemnity bond on non-judicial stamp paper, declaring that there are no pending dues.
- File Form 24: Log in to the MCA portal and upload Form 24 along with all required attachments.
- Public Notice by RoC: Once filed, the RoC will publish a notice on the MCA website for 30 days to invite any objections from the public.
- Final Strike-Off: If no objections are received, the RoC will issue a notification striking off the LLP’s name from the register.
Documents Required for LLP Closure
To successfully complete the procedure to close LLP, keep the following documents ready:
- Statement of Accounts: Certified by a CA, showing NIL assets and liabilities (dated within 30 days of filing).
- Affidavits: From all designated partners (notarized).
- Indemnity Bond: Duly notarized and signed by all partners.
- Consent of All Partners: A written document signed by every partner.
- Latest Income Tax Return (ITR): A copy of the acknowledgment of the last filed ITR.
- Bank Account Closure Certificate: A formal letter from the bank confirming the account is closed.
- LLP Agreement: A copy of the initial agreement (and any amendments).
LLP Closure through Form 24
Form 24 is the specific electronic application used for the “Fast Track Exit” of an LLP. It is titled “Application to the Registrar for striking off the name.” At Startup Portal Business Service, we emphasize that this form is the most efficient way to close a defunct entity compared to the lengthy “Winding Up” process.
The form requires the Digital Signature (DSC) of the authorized designated partner and must be certified by a practicing professional (CA, CS, or CMA).
Time Limit & Government Fees for LLP Closure
- Government Fees: The standard filing fee for Form 24 is ₹1,000.
- Time Limit for Statement of Accounts: The CA-certified statement is valid for only 30 days. You must file the form within this window.
- Total Processing Time: Generally, it takes 3 to 6 months for the RoC to officially strike off the name after the application is submitted, provided there are no objections.
Common Mistakes in LLP Closure Process
Many startups face rejections during the closure of LLP due to avoidable errors. Startup Portal Business Service recommends watching out for these pitfalls:
- Pending Annual Filings: Attempting to file Form 24 without completing Form 8 and Form 11 for previous active years.
- Incorrect Statement Date: Using a Statement of Accounts that is older than 30 days.
- Active Bank Accounts: Failing to attach the bank closure certificate or keeping an account active.
- Unsettled Liabilities: Filing for strike-off while still owing money to creditors or the government.
- Expired DSC: Not ensuring that the partners’ Digital Signatures are active at the time of filing.
Conclusion
Navigating the LLP closure procedure requires meticulous documentation and a clear understanding of MCA regulations. By following the “Fast Track” route via Form 24, you can ensure that your entrepreneurial journey ends on a legally sound note, free from future penalties.
Whether you are a dormant startup or a partnership looking to move on, Startup Portal Business Service is here to simplify the professional legwork for you. Don’t let a non-operational LLP become a financial burden—start your closure process today!
Contact Startup Portal – +918975400253 / +917249645760