New

Alankar Mishra

November 25, 2024

Blog |

Explore GST

Basics of GST

A Step by Step guide to LLP Strike-off Procedure

Owing to their easy handling and low-risk aspects, Limited Liability Partnerships (LLPs) are becoming popular among business enterprises in India. Nonetheless, there are cases where an LLP becomes non-functional, or the partners of the LLP agree to wind up the business. In such scenarios, the LLP Strike-off Procedure offers a formal way of dissolving the LLP which meets the legal requirements, bringing its closure without unresolved liabilities and obligations. This procedure is vital in upholding the legal and financial management of the entities.

What is LLP Strike-Off?

The process of plating refers to having been awarded to the Ministry of Company Affairs the power to over a company’s registration alongside components of the Register of Companies (MCA). On application of strike off the company is said to have been dissolved and the legal responsibility of the entity is extinguished.

Eligibility Criteria for LLP Strike-Off

An LLP can be struck off the register if:

1. It has not been active nor has it begun any business since its establishment.

2. A period of at least one year has passed without any business activity being carried out.

3. It has no outstanding debts or creditors.

4. The decision to wind up the LLP is unanimous among the partners.

Note: The LLP must clear off all the dues, finish all the pending forms and confirm that there aren’t any pending court cases.

Step-by-Step LLP Strike-Off Procedure

Step 1: Check for Compliance

Before applying for completion of the process of strike-off, one should ensure:

Submission of all late Annual Returns (Form 11) and Statement of Accounts & Solvency (Form 8) without exception.

Settling of all pending dues or penalties from the government.

Step 2: Obtain Partner Consent

It is necessary for all remaining partners of the LLP to resolve by 100% consensus to strike off the LLP and also to close the jurisdiction. Such resolutions must be passed and have to be in writing and signed by each of the partners.

Step 3: Close Bank Accounts and Settle Liabilities

Terminate all active bank accounts in the name of the LLP.

Discharge all relevant debts about the firm including those of the creditors and employees.

Step 4: Prepare the Required Documents

Gather the following documents for the strike-off application:

Application Form LLP-24.

Records of the meeting or the partner resolution: It is to make an instruction to terminate the LLP.

All other partner affidavits: To confirm that the suspending LLP does not owe anything.

Indemnity Bond: Provided by all the other partners that there would not be any future liabilities.

Certificate of bank closure: Evidence of the termination of every LLP account that is active.

Balance Sheet: Certified by a CA and demonstrates zero assets or zero liabilities as per CA.

Income Tax Clearance Certificate (ITCC): This is available through the Income Tax Department, as there are no outstanding dues.

‍Step 5: File Application in LLP-24

Submit and upload Form LLP-24 on the MCA website.

Enclose the necessary documents with the application.

Make payment of the fee specified.

Step 6: MCA Review and Approval

Once the application is submitted:

The MCA examines the documents and guarantees conformity with relevant statutes and antitrust regulations.

In case all the conditions are satisfied, the MCA publishes a notice for the strike-off in the Official Gazette.

Step 7: Final Strike-Off

The Ministry of Corporate Affairs removes the name of the LLP after giving proper notice for usually thirty days and this name removal is done if there are no objections raised. A certificate of strike-off is issued at the end of the process.

Important Points to Consider

Liability of Partners: Once the LLP is struck off, its partners may be held liable for the remaining undisclosed liabilities or for committing fraud against the LLP.

Reactivation of LLP: Strike-off of LLP can be done within 20 years from the date of strike-off, where any person including a creditor has filed an appeal with the NCLT.

Penalty for Non-Compliance: A penalty or legal action can be imposed in the cases of non-filing of requisite forms or non-compliance with the procedure.

Tax Clearance: Check that there are no outstanding dues/balances/tax returns to ensure that the application for strike-off will not be rejected.

Document Checklist for LLP Strike-Off

Outcome resolution.

All partnership partners’ signed affidavits.

Indemnity Bond.

Certified Statement of Accounts prepared by the Chartered Accountant.

Statement of the final closure of the bank account.

Income Tax issues in conformity with the law and/or the Code.

LLP 24 application form.

Benefits of Strike-Off Procedure

Legal Compliance: A formal closure avoids completing filing requirements and non-compliance penalties.

End of Liabilities: Removal of LLP from the register legally terminates its obligations and liabilities.

Cost Savings: Costs linked with filing annual compliance documents in an inactive LLP are also reduced.

Simplified Process: The costs involved in carrying out strikes are not only low but are also reasonable compared to other ways of closing the business.

Conclusion

Striking off an LLP is a fundamental procedure for entities which are no longer functioning or operative. The partners can dissolve an LLP without facing any unnecessary penalties or liabilities by observing the procedures as presented above and ensuring that legal requirements are satisfied. Right documentation, filing at due dates, and routine compliance with MCA norms are vital to effecting the striking off of the firm with minimum hitches.

FAQs

1. What is the LLP strike-off procedure?

The final steps of striking off an LLP include filling inward Form LLP-24 with the MCA, furnishing the relevant documents, and getting approval for the closure of the LLP.

2. When is an LLP eligible for strike-off?

If an LLP has not been operational ever since its registration, or if it has been inactive for more than a year, it is eligible to apply for strike-off.

3. What is Form LLP-24?

Form LLP-24 is the form which is used for applying to the Ministry of Corporate Affairs (MCA) for striking off the name of the LLP from the register of LLPs.

4. What documents are required for the LLP strike-off?

Core documents include a partner resolution, sworn deposition, a bond for indemnity, a certificate of tax clearance, and an audited statement of accounts.

5. Can an LLP be restored after being struck off?

Absolutely, a struck-off LLP can be reinstated within the period of twenty years by making an appropriate appeal to the National Company Law Tribunal, India.

Featured Posts

Section 194I of Income Tax Act - TDS on Rent

Rule 89 of CGST Rules: Key Points Every Taxpayer Must Know

Landmark GST Rulings on Agricultural Income

Milk Cream HSN Code and GST Rate - 0401

Interchangeable Tools – GST Rates & HSN Code 8207

GST rates and HSN code 6404 for Footwear Uppers Of Textile Materials

You are not able to claim ITC in GST, here is why

The Best App to Pay Credit Card Bills Instantly

Featured Posts

You might also like

The Ultimate Guide to GSTR-3B: Mastering Your Input Tax Credit Claims

GST Rates and SAC Code 9995 for Membership Organization Services

Guide on using standard invoice formats for small business owners