Before we understand LLP Strike off, let us have a brief idea on LLP (Limited Liability Partnership :
LLP means an alternative corporate business form that it gives the benefits of limited liability of a company and the flexibility of a partnership. The LLP can continue its existence irrespective of changes in partners. It is capable of entering into contracts and holding property in its name.
The LLP is a separate legal entity, is liable to the full extent of its assets but liability of the partners is limited to their agreed contribution in the LLP.
LLP Strike Off:
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.
An LLP need to be closed down / LLP Strike off can be done on the following conditions:
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.
Reasons why an LLP may close its business / Reasons for LLP Strike off?
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.
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 registrar 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 motto strike off the LLP.