Limited Liability Partnership is an alternative corporate business form that gives the benefits of limited liability of a company and the flexibility of a partnership.
Limited Liability Partnership is an alternative corporate business form that gives the benefits of limited liability of a company and the flexibility of a partnership. The Limited Liability Partnership is a separate legal entity, is liable to the full extent of its assets but the liability of the partners is limited to their agreed contribution in the LLP.
The LLP can continue its existence irrespective of changes in partners. It is capable of entering into contracts and holding property in its own name.
An LLP can strike off its business by any of the following two ways:
A) By Declaring the LLP as Non-functioning:
In case the LLP wants to close down its business or where it is not carrying on any business operations for a period of one year or more, it can make an application to the Registrar for declaring the LLP as defunct and removing the name of the LLP from its register of LLP’s.
B) By winding up of LLP:
In this process all the assets of the business are disposed of to meet the liabilities of the same and surplus any, is distributed among the owners. The LLP Act 2008 provides for the following two modes for winding up the LLP i.e.:
Voluntary Winding-up: Under this, the partners may between themselves decide to stop and wound up the operations of the LLP.
Compulsory Winding-up: A limited liability partnership may be compulsorily wound up by the Tribunal,—
The Ministry of Corporate Affairs introduced the Limited Liability Partnership (Amendment) Rules, 2017 with effect from 20th May 2017 and has amended Limited Liability Partnership Rules, 2009. With this amendment, LLP Form 24 has been introduced by the MCA and it is now possible to easily close an LLP by making an application to the Registrar for striking off the name of LLP.
After preparing all the documents LLP is required to file Form-24 with ROC with all the required attachments.
The Registrar will verify all the documents presented by LLP and if there is no objection raised by the Registrar, they will strike off the LLP.
By introducing the Limited Liability Partnership (Amendment) Rules, 2017 the procedure for closing down the LLP has been made easy and simple. The penalties for filing any statutory return under the Limited liability Partnership Act or under Income Tax Act is quite high, therefore, it would be prudent for dormant or defaulting LLP’s to wind up their business.
Hence, it is best to strike off the nonoperational or defaulting LLP that are accruing penalties.
Udyog Buddy has helped a number of clients to close down their nonoperational or defaulting LLP’s for avoiding heavy penalties in the future under the Limited liability Partnership Act or under Income Tax Act.