How to cancel LLP Registration using LLP Form 24?

Posted by Enterslice India on January 4th, 2019

LLP Registration is gaining fame for its irreplaceable benefits that it provides to its clients. With LLP, the process of transferability is quite easy and simple and the owner gets an uninterrupted existence. If the turnover is less than Rs. 40 lakh, then no audit is required. Likewise, there are several other benefits that a business with LLP registration can avail.

But there’s always a two side of the coin. If one is positive, then the other will unquestionably be negative. And, LLP is no exception. LLP has been structured in a way that one partner has more rights than the other. Because of this, the partner with lesser rights can feel compromised if the higher shareholder chooses to take the business in a direction that affects their interests.

Therefore, chances are that the lesser shareholder can become insecure and want to indulge himself/herself in a different business structure. And here’s where the need to cancel the LLP registration will be required.

In this blog, we will cover the following topics described below:

• Introduction to LLP Registration
• Reasons for closing/ canceling LLP registration
• Procedures involved in the cancelation of LLP registration using LLP Form 24

Introduction to LLP Registration

LLP (Limited Liability Partnership) is a business structure registered under the Limited Liability Partnership Act, 2008. Such kind of business structure offers an immense significance to its clients and requires a minimum of two partners to run the business. Every partner will have their own liability towards the business and neither of them will be accountable for other partner’s misconduct or wrong decisions.

Mostly, LLP is preferred by small businesses and those who are not willing venture funding in business. The annual maintenance of such business is cheaper than a Private Limited Company.

Reasons for closing/ canceling LLP registration

There could be various reasons to close LLP or cancel the LLP registration. There are a few things that entrepreneurs are unable to figure out before the registration. So when they are unable to carry the business in LLP format, the need of closing business and winding-up LLP appears. Below you can find various other reasons for canceling LLP registration. Reasons are-

• There hasn’t been any commercial activity or business operations since the incorporation of LLP and one year has passed.
• Partners aren’t willing to continue the business or partnership anymore.
• If LLP has become bankrupt.
• If the LLP is registered some specific project and that has been completed.
• Only one partner remains after the death of the other.
• Order by the court due to certain circumstances. 

Procedures involved in the cancelation of LLP registration using LLP form 24

Step1: Only LLPs that haven’t commenced any business activity for a long time can file for LLP Form 24. The LLP must first cease all commercial activities of the business. 

Step2:  Prior to ceasing commercial activities, bank accounts opened in the name of LLP must be closed and a letter evidencing closure of the bank account in the name of LLP must be obtained from the bank.

Step3: It is mandatory for all the designated partners of the LLP to draft an affidavit indicating that the Limited Liability Partnership ceased to carry on commercial activity from the date of commencement. Moreover, the LLP partners also need to declare that the LLP has no liabilities and remunerate any liability arising after striking off its name from the Register.

Step4: A copy of the acknowledgment of the latest income tax return of the LLP and LLP deed must be closed along with the LLP Form 24.

However, the same isn’t required if the LLP hasn’t filed the income tax return and hasn’t commenced any business activity.

Step5: The LLP agreement needs to be filed with MCA within the 30 days of registration. If this compliance is missing and LLP agreement hasn’t been filed, then the initial LLP agreement, along with any amendments must be filed, if entered into and not filed.

Step6: As an applicant, you must obtain a statement of accounts disclosing NIL assets and NIL liabilities certified by a practicing Chartered Accountant up to a date not earlier than thirty days if the date of filing of Form 24.

Step7: The last step is to file all the required documents along with the LLP Form 24 with the MCA to strike off the name of LLP.

When the application will be found acceptable, the concerned Registrar of Companies would cause a notice to be published on the MCA website announcing the striking off the LLP.

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