How to Close an LLP Using LLP Form 24

Introduction

Limited Liability Partnerships (LLPs) are popular business structures in India, offering a blend of flexibility and liability protection. However, situations may arise where an LLP is no longer functional or its partners choose to end its operations. In such cases, closing an LLP becomes necessary to prevent future legal obligations, compliance penalties, and financial burdens.

To close an LLP officially, the Ministry of Corporate Affairs (MCA) provides a simple method through LLP Form 24. This form allows the LLP to be struck off the register, effectively dissolving the business entity in the eyes of the law. By filing Form 24, partners can terminate their legal and financial obligations related to the LLP.

This comprehensive guide will walk you through the complete process of closing an LLP using LLP Form 24. It includes eligibility criteria, required documents, the filing process, common challenges, and important compliance steps that follow the closure.

What is LLP Form 24?

LLP Form 24 is the official document filed with the Ministry of Corporate Affairs (MCA) to request the closure of an LLP. By filing this form, an LLP can officially cease to exist in the eyes of the law.

• Primary Purpose: Striking off the LLP from the MCA records.
• Outcome: The LLP will be dissolved, and its partners will no longer be liable for any future statutory compliance or taxes.

Once filed and accepted, the LLP is no longer required to submit annual returns or other compliance documents.

Eligibility for Closing an LLP Using Form 24

Before proceeding with the closure of an LLP using LLP Form 24, certain eligibility criteria must be met. These criteria ensure that the LLP has ceased operations and is free from liabilities.

Eligibility Criteria:

1. Inactive for at least one year
   The LLP should not have been conducting any business activities for at least one year. Alternatively, it should not have started business since incorporation.
   Example: An LLP set up for a project that has not started operations can file Form 24 after one year.
   
2. No outstanding debts or liabilities
   All debts, loans, or liabilities of the LLP should be settled before applying for closure.
   Example: If the LLP owes money to creditors or has pending tax payments, these must be cleared first.
   
3. Consent from all designated partners
   Every partner must agree to the dissolution of the LLP. Without unanimous consent, the closure cannot proceed.
   
4. Completion of all pending filings
   The LLP must have filed all income tax returns, GST returns, and other necessary statutory filings.
   Example: If the LLP has not submitted its annual returns for the last few years, they must be filed before applying for closure.
   
5. Closure of Bank Accounts
   The LLP must ensure that all its bank accounts are closed and obtain a closure certificate from the bank.
   Example: The bank certificate confirms that the LLP has no active financial transactions pending.
   

Documents Required for LLP Closure

Filing LLP Form 24 involves submitting a set of essential documents to support the closure request. Below are the required documents:

Required Documents:

1. Statement of Accounts
   
   • A certified statement of accounts, not older than 30 days, should be submitted. This document needs to be signed by a Chartered Accountant (CA).
     Example: If the LLP has no transactions for the past year, the balance sheet will show no outstanding liabilities.
2. Affidavit and Indemnity Bond
   
   • An affidavit and indemnity bond from all designated partners confirming no outstanding liabilities.
     Example: Partners may state that no taxes or fees are pending with authorities.
3. Consent Letter from Partners
   
   • A formal letter stating the agreement of all designated partners to the closure of the LLP.
     Example: The letter should be signed by all the partners, confirming their consent for filing Form 24.
4. Latest Income Tax Return Copy
   
   • If applicable, the latest filed Income Tax Return (ITR) must be attached.
     Example: If the LLP filed returns for the last financial year, this ITR copy will need to be included.
5. Copy of LLP Agreement
   
   • If available, provide a copy of the original LLP Agreement.
     Example: This agreement outlines the roles and responsibilities of each partner in the LLP.
6. No Objection Certificate (NOC)
   
   • NOC from creditors (if any) confirming they have no objection to the closure of the LLP.
     Example: If the LLP has loans or debts, obtaining NOC from creditors is mandatory.
7. Bank Closure Certificate
   
   • The certificate from the bank confirms that the LLP has no active bank accounts.
     Example: A formal letter from the bank confirming all accounts linked to the LLP have been closed.

Step-by-Step Guide to Filing LLP Form 24 Online

Filing LLP Form 24 can be done through the Ministry of Corporate Affairs (MCA) online portal. Here’s a detailed step-by-step guide:

Step 1: Prepare the Documents

• Ensure all documents mentioned above are ready and verified.
• If necessary, seek help from a professional (CA/CS) to prepare the required statements and affidavits.

Step 2: Log in to the MCA Portal

• Visit the official Ministry of Corporate Affairs (MCA) website.
• Log in with your credentials and access the LLP services section.

Step 3: Download LLP Form 24

• Navigate to the “Form 24” section and download the form.
• Fill in the required information such as LLP name, registration number, and cessation of business date.

Step 4: Upload the Required Documents

• Attach the Statement of Accounts, Affidavit, Indemnity Bond, and other necessary documents.
• Ensure all files are uploaded in the correct format (usually PDF).

Step 5: Digital Signature and Filing Fees

• Digital Signature: The form needs to be signed digitally by the designated partners and a practicing professional (CA/CS).
• Government Fees: Pay the prescribed filing fees (usually INR 500) online.

Step 6: Submit and Track Status

• Submit the form online and track the status on the MCA portal.
• Wait for confirmation from the Registrar of Companies (RoC) after the review process.

Step 7: Confirmation of Closure

• Once accepted, the MCA will strike off the LLP from its records. The LLP will no longer exist legally, and you will be notified.

Processing Time and Compliance After Closure

Typically, the processing time for closing an LLP using LLP Form 24 takes about 2-3 months. This period depends on document verification, RoC office workload, and completeness of the application.

Post-Closure Compliance:

• No more annual returns: After closure, the LLP no longer needs to file annual returns.
• Tax Liabilities: Partners are relieved from any tax-related obligations for the LLP after its dissolution.
• Record Maintenance: Keep records of closure for future reference or legal purposes.

Common Challenges in LLP Closure and How to Overcome Them

Common Issues and Solutions:

1. Unresolved Liabilities
   Ensure all debts, taxes, and liabilities are cleared before filing. A pending debt can cause delays in the process.
   Solution: Settle all liabilities well in advance before filing the form.
   
2. Incomplete Filings
   Missing documents such as income tax returns or NOC from creditors can delay closure.
   Solution: Cross-check documents and ensure completeness before submission.
   
3. Errors in Filing
   Filing mistakes or missing information can lead to rejection of the application.
   Solution: Consider seeking professional assistance to avoid errors in the form.
   

Impact of LLP Closure on Partners and Business Operations

Once the LLP is officially closed:

• Partners’ Liability: Partners are no longer responsible for compliance or financial obligations of the LLP.
• Business Operations Cease: All operations under the LLP must stop.
• Transfer of Intellectual Property: If the LLP owns intellectual property, it may need to be transferred or surrendered.
• Starting a New Venture: Partners can start a new LLP or another business entity if they wish to continue operations.

Conclusion

Closing an LLP through LLP Form 24 is an important step in ensuring that an inactive business is legally dissolved, relieving partners from further liabilities. By following the proper procedures, ensuring all outstanding obligations are cleared, and submitting the required documents, the LLP closure process can be completed smoothly.

If you need professional assistance to navigate the closure process, RegisterKaro is here to help! We offer expert support to make your LLP closure hassle-free, from paperwork to final approval.

Contact Us Today:
Email: support@registerkaro.in
Phone: +918447746183

Frequently Asked Questions (FAQs)

1. Can I close an LLP without filing past due annual returns?
No, all pending annual filings must be completed before applying for LLP closure.

2. How much does it cost to file LLP Form 24?
The government filing fee is approximately INR 500, though professional fees may vary.

3. Can an LLP be reopened after closure?
No, once an LLP is officially struck off, it cannot be reopened. A new LLP must be formed.

4. Do I need professional help to file LLP Form 24?
While not mandatory, professional assistance can reduce errors and ensure compliance.

5. How long does it take to close an LLP?
The closure process typically takes 2-3 months, depending on document verification.

6. What if the LLP has outstanding liabilities?
All liabilities must be settled before applying for closure.

7. Can a new LLP be formed by the same partners after closure?
Yes, once the LLP is closed, the partners are free to form a new business entity.

8. Do I need to transfer ownership of assets during closure?
Yes, assets such as intellectual property or trademarks need to be transferred or surrendered.

9. What happens to the employees of the LLP after closure?
The partners must ensure that all employees are notified and compensated appropriately before closure.

10. How do I know the status of my LLP closure?
You can track the status of your application through the MCA portal.