The Limited Liability Partnership makes use of both the advantages of the Company and Partnership in a single form of organization and in LLP one partner is not responsible or liable for another partner's misconduct or negligence. Hence, LLP is considered to be one of the famous business entity processes. Often start-ups also tend to form their business under Limited Liability Partnership since LLP is a separate legal entity and is also considered under Startup India Registration. And for the same reason, for the closure of LLP, there are various legal procedures that need to be taken care of.
There may be various reasons for closure of a Limited Liability Partnership, some of them are as follows:
1) If your LLP is inactive for whatever reason it should officially wind up since heavy fines and penalties are imposed when LLP fails to go through compliance and file returns.
2) The statutory compliance's of maintaining LLP is far greater than the charges that LLP would incur for winding up.
LLPs may close either by winding up or by striking off its name from the Register. The winding-up is costly or time-consuming compared to Striking off. But if the LLP plans to close the LLP by winding up then there are two modes, voluntarily winding up or compulsory winding up.
In 2017, MCA introduced Form 24 as a closure of LLP. The filing of Form 24 has made the process of winding up quite easy. An LLP who wants to wound up can apply to strike off their name by applying LLP Form 24.
In voluntarily winding up, partners discuss among themselves and come to the point of winding up operations of the business. However, for voluntary winding of LLP there are certain conditions set forth which are as follows:
1) A minimum of 3/4th LLP Partners should be approved for winding up.
2) A formal declaration has to be made by partners that LLP has no standing debt or that it will pay all debts within 1 year from the day of winding up.
3) Partners should take care of Valuation of assets.
4) The partners should produce a Statement of assets and liabilities up to date.
5) The partners should provide a declaration that LLP is not wound up for defrauding any person.
6) Partners should provide a valid and genuine resolution for the reason of voluntary winding up.