As LLP is a separate legal entity, it is created by following a legal proceeding hence when it comes to its closure there is a proper legal procedure to be followed.
An LLP may be closed through winding-up or through striking off its name from Register of LLP. The winding-up may be a costly or time-consuming affair for many LLPs as it includes approval from Tribunals and involvement of Liquidators. Therefore, the LLP that has been non-operative since its formation or for more than a year, may proceed the easy way of exit i.e. Strike-off.
The LLP will be declared struck-off after the publication of notice by Ministry. Once it is struck-off, the LLP cease to be in existence in the eyes of law. In case the LLP wants to close down its business or where it is not carrying on any business operations for the 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.
When the LLP has incorporated a Certificate of Incorporation is issued by the Registrar of Companies which acknowledges the existence of the LLP. Once the name of the LLP is entered into Register of LLP it cannot be removed unless the LLP applies for strike off or it is processed by law. When the LLP fails to commence its business or fails to submit yearly returns, the registrar may suo moto strike off the LLP.
LLP is inoperative from the date of incorporation or inactive for a period of at least one year
LLP does not have any assets / liabilities as on the date of application.
Closure of current account of the LLP has been done
LLP Obtain the consent of the parties i.e any other authority, creditors and partners.
The statutory compliance of maintaining an LLP are higher than the cost of winding up. If the LLP is dormant it’s better to wind up than fulfill the compliance.
To avoid fines and penalty for late filing, it is better to officially Wind Up LLP’s which are inactive.
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