Closure of LLP in India: Process, Fees & Closure Methods 

A Limited Liability Partnership (LLP) is a flexible business structure that is the combination of the advantages of both a partnership and a company. While it offers many benefits during its operation, there may come a time when the partners decide to close the LLP due to various reasons such as inactivity, lack of business, or shifting to another business model. Closing an LLP requires following a structured legal process as per the provisions of the LLP Act, 2008. This blog provides a complete guide on the closure of LLPs in India, including methods, eligibility, documentation, procedure, consequences, and more.

An LLP can be closed voluntarily or by striking it off through a legal process. The closure helps relieve the partners from continuous compliance obligations, penalty risks, and the burden of maintaining a non-operational entity. The Ministry of Corporate Affairs (MCA) has provided two main routes for the closure of LLPs – voluntary winding-up and striking off by filing Form 24. Choosing the correct method depends on the LLP’s operational and financial status.

Note: With effect from August 5, 2024, all applications for strike-off of LLPs via Form no. 24 are now processed centrally by the Centre for Processing Accelerated Corporate Exit, viz. (C PACE) as per MCA notification. This centralization aims to speed up and standardize the strike-off process.

Methods of Closing an LLP

1. Voluntary Winding-up

The first way for closing an LLP is Voluntary winding-up that is applicable when the LLP decides to close its operations and dissolve with the consent of its partners. This process is more detailed and is generally opted for when the LLP has liabilities or pending dues to clear before closure.

It also requires the formal steps which includes a Declaration of Solvency, appointment of a liquidator, creditor approval (if liabilities exist), and filing of final reports to the NCLT (National Company Law Tribunal). The process concludes with an official dissolution order from the Tribunal.

2. Striking Off Name from Register (Fast Track Closure)

Under the Rule 37(1)(b) of the LLP Rules, 2009, an LLP can apply for the process of striking off its name by filing Form 24 if it has not been operational or carried out business for at least one year. This is the most commonly used method, especially for dormant or inactive LLPs.

Eligibility for Closure

To close an LLP through the striking off route, viz. (Form 24), the following conditions must be met:

• The LLP must have ceased business operations or commercial activity for at least one year.
• All relevant compliances and filings must be up to date until the cessation of business.
• There should be no pending litigation in which LLP is involved.
• The LLP should not have any liabilities or outstanding dues...!
• Consent of all required partners is required for closure.
• Mandatory filings like Form 8 (Statement of Accounts and Solvency) and Form 11 (Annual Return) must be completed up to the date of cessation. In addition, at least one Income Tax Return should be filed if there was any financial activity.

Documents Required for LLP Closure

Here are the key documents needed to file for LLP closure through Form 24:

1. Application for Striking Off (Form 24)

2. Board Resolution or Consent of all Partners

3. Statement of Accounts (not older than 30 days from the date of filing)

• This must be certified by a Chartered Accountant.

4. Affidavit by Designated Partners

• Declaring the LLP has no liabilities or pending obligations.

5. Indemnity Bond

• Stating that partners will indemnify any liabilities that may arise after closure.

6. Income Tax Return Acknowledgment

• For the period up to the date of cessation of business (if applicable).

7. Copy of Initial LLP Agreement and any amendments

8. Copy of Resolution signed by all partners approving the closure

9. Bank Account Closure Certificate – A proof that all the LLP’s bank accounts have been closed prior to filing Form 24.

Procedure for Closure

Step 1: Hold a Meeting of Partners

All the partners should hold a meeting and pass a resolution for closure. Their consent must be documented in writing.

Step 2: Clear Outstanding Liabilities

Before initiating closure, ensure that the LLP has no dues pending – including tax liabilities, vendor payments, or statutory dues.

Step 3: Prepare and Verify Financial Statements

Get the final financial statements prepared and certified by a practicing Chartered Accountant. These statements should reflect nil assets and liabilities.

Step 4: Draft Affidavit and Indemnity Bond

All designated partners must submit an affidavit which stating that the LLP has no liabilities and an indemnity bond that they will pay any future liabilities.

Step 5: File Form 24

Login to the official MCA portal, fill in Form 24, attach the required documents, and submit the form with applicable fees. From August 2024, all strike-off applications are processed by the C-PACE. Ensure your documents meet the revised standards to avoid delays.

Step 6: Await Approval

Once submitted, the Registrar of Companies (RoC) reviews and examine the application. If satisfied, the RoC will issue a notice of striking off and remove the LLP’s name from the register...!

Consequences of Closure

• The LLP ceases to be existed as a legal entity once its name is struck off.
• The LLP is not liable for any compliance or filing post-closure.
• If any liabilities or legal issues arise after closure, the designated partners may be personally liable.
• The LLP’s PAN and TAN will also become inactive.
• Bank accounts must be closed before applying for closure.
• Even after strike-off, designated partners can be held personally liable if any undisclosed liabilities or frauds surface in the future. The indemnity bond does not provide full immunity.

Fees for LLP Closure

The official government fee for filing Form 24 with the Ministry of Corporate Affairs (MCA) for striking off an LLP is generally ₹500. However, for LLPs not classified as "small LLPs", the filing fee may go up to ₹1,000, depending on the category and capital contribution of the LLP, as per the latest MCA fee schedule.

Benefits of Closing an LLP

1. Avoid Penalties

• Inactive LLPs still need to comply with annual filings. Closure avoids future penalties for non-compliance.

2. No Compliance Burden

• Post-closure, partners are relieved from the burden of audits, filings and other regulatory formalities.

3. Cost-Saving

• No need to spend money on professional services or compliance maintenance for a dormant entity.

4. Legal Clarity

• Closure ensures legal clarity by officially declaring that the LLP has ceased to exist.

5. Better Focus

• It allows entrepreneurs to focus on active businesses without worrying about old, unused business entities.

Why Choose Us for LLP Closure?

• Expert Team: We have a team of skilled and qualified legal and accounting professionals who can handle closure filings effortlessly and seamlessly.
• Fast Service: We aim to complete the process at the earliest with proper documentation and filing.
• Affordable Plans: We offer competitive pricing for LLP closure services with no hidden charges.
• Online & Hassle-Free: Entire process can be done remotely – you don’t have to visit any office or department.
• Personalized Support: Our team is always available to answer your all questions and guide you through each step.

Conclusion

Closing an LLP in India is a regulated process that provides legal certainty and relief from compliance duties. Depending on its financial and operational status, an LLP may choose either the way of voluntary winding-up or strike-off through Form 24. With the introduction of the system of C-PACE, the closure process is now get centralized for faster approvals. Ensuring all liabilities are settled, filings are complete, and documents are accurate is essential for a smooth exit. A proper closure not only saves costs but also protects against future liabilities. Seeking professional help ensures adherence to MCA norms and prevents legal or procedural errors.

FAQs

1. Can an LLP be closed without filing income tax returns?

If the LLP never commenced business, and no transactions were made, it may close without filing income tax returns. Otherwise, at least one return should be filed.

2. How long does it take to close an LLP through Form 24?

The process usually takes 3 to 6 months; rest depends on document readiness and RoC processing time.

3. Can an LLP be closed if it has pending dues or liabilities?

No, all liabilities must be cleared before applying for the process of closure through Form 24.

4. Is closure mandatory for inactive LLPs?

It is not mandatory, but advisable to avoid compliance burden and penalties.

5. What happens if an LLP does not file Form 24 and stays inactive?

It may attract heavy penalties for non-filing of annual returns and statements of accounts and solvency.