CLOSE AN LLP STEP BY STEP - LIMITED LIABILITY PARTNERSHIP

Dear Professionals

Smiles for All

In this article, we shall study about the various aspects of striking off a LLP, Often; entrepreneurs are form Limited Liability Partnerships but are not able to maintain the same. Due to adverse market situation or less business opportunity Partners fails to carry or commence the business of LLP. Also, the penalty for LLPs defaulting in filing of any statutory return is Rs.100/- per day, without any maximum limit. Hence, it is often best to strike off/close dormant LLPs so that there is no requirement to file LLP Form 11, LLP Form 8 and Income Tax Return for the LLP each financial year to maintain compliance and avoid penalty.

The LLP Act, 2008 provides some important guidelines as to how one can close an LLP. The provisions of striking off of LLP are governed by Rule 37(1) of the Limited Liability Partnership Rules, 2017. Accordingly, the LLP can be stroked off in following two ways, likewise that of a Company:

MANDATORY STRIKING OF THE LLP:

 Under mandatory striking off, the ROC shall send a notice to the LLP of his intention to strike off the name of the LLP from the register and requesting them to send their representations within a period of one month from the date of the notice in the case the LLP is not carrying on any business for a period of two preceding years. Here it is important to note that the ROC shall have reasonable cause to believe that the LLP is not doing any business in case Form 8 and Form 11 are not filed for previous two years.

VOLUNTARY STRIKING OFF THE LLP:

Under voluntarily striking off of LLP, the LLP may make an application in e-Form 24 to the Registrar with the consent of all the partners of the LLP for striking off its name from the register.

Any LLP which has been inoperative for more than 1 year or incorporated for more than One year and have no business can apply for Closure 

THE FOLLOWING PROCEDURE CAN BE FOLLOWED FOR CLOSING A LLP BY FILING FORM 24:

SERIAL	PARTICULARS
1.       Complete all the Pending Compliances.	After incorporation of a LLP, the LLP agreement must be filed with the MCA within 30 days of registration. In case this compliance was missed and LLP agreement was not filed that compliance must be completed. Any overdue returns in Form 8 and Form 11 up to the end of the financial year in which the limited liability partnership ceased to carry on its business or commercial operations must be filed before filing LLP Form 24.
2.       Ensure all Statutory Dues, if any are settled.	Prior to filing LLP Form 24, Any Dues towards statutory authorities must be clear , Return regarding Income Tax must be filed, Since the copy of the same shall be attached in the Form-24.
3.       Closure of Bank Account,  if Any	Prior to filing LLP Form 24, any bank account opened in the name of the LLP must be closed and a letter evidencing closure of the bank account in the name of the LLP must be obtained from the Bank same can be demanded by the ROC to be attached in Form.
4. Obtain Certificate from Chartered Accountant.	A  statement of accounts disclosing NIL assets and NIL liabilities, that is certified by a practicing Chartered Accountant up to a date not earlier than thirty days of the date of filing of Form 24 must be obtained.
5. Prepare Closure Documents.	Prepare Attachments to be attached in Form -24 as provided under the law, Further Format of Application to Close is also attached.
6. File LLP Form 24	The documents along with LLP Form 24 (Download LLP Form 24) shall be filed with the MCA to strike off name of LLP. The Registrar, where he has sufficient cause to believe that the limited liability partnership has any asset or liability, satisfy himself that sufficient provision has been made for the realization of all amount due to the limited liability partnership and for the payment or discharge of its liabilities and obligations by the limited liability partnership , if found acceptable, the concerned Registrar of Companies would cause a notice to be published on the MCA website announcing the striking off of the LLP.
7. Surrender PAN of LLP	On Receipt of Certificate of striking off of the LLP, Authorized person should surrender the PAN and TAN of the Limited Liability Partnership.

Further, it is important to note that the following shall be the attachments to e-Form 24:

·         Affidavit signed by the designated partners [as per the format given sub clause (b) of clause (II) of sub   rule (1A) to rule 37)];

·         Copy of the undertaking/ indemnity bond for striking off name Indemnity bond

·         Copy of authority to make the application duly signed by all the partners;

·         Copy of acknowledgement of latest ITR.

·         Consent of all the partners;

·         Consent of creditors is also needed to be filed.

·         Statements of accounts disclosing nil assets and nil liabilities certified by a Chartered Accountant in practice made up to a date not earlier than thirty days of the date of filing; and

·         Application disclosing the reasons for strike off and the operative status of the Company.

FORMAT TO ISSUE A STATEMENT OF ASSETS AND LIABILITIES BY THE CHARTERED ACCOUNTANT

In accordance with the provisions of the LLP Act, 2009, there is no fixed format for statement of assets and liabilities of an LLP. However, in general parlance, the auditors prepare the accounts of the LLP as per the format of Form 8 and accordingly, the said format shall be followed for preparing the said statement of assets and liabilities.

FORMAT APPLICATION FOR CLOSURE OF LLP AS PER RULE 37(1)(B)

Date

The Registrar of Companies,

_________________

Sub: Application For Closure of LLP As Per rule 37(1)(b) Of The Limited Liability Partnership Rules,2009

Sir,

With respect to the subject matter cited above, it is hereby submitted that LLP M/s ABC LLP that is inoperative and has no intention to do any business or commercial activity at all in future. Thus the LLP is defunct. You are requested to strike off the name of the LLP under Rule 37(1) (b) of the Limited Liability Partnership Rule, 2009.

Thanking You

Yours Truly

For ABC LLP

Authorized Signatory/Designated Partner

FORMAT AUTHORIZATION TO MAKE APPLICATION TO STRIKE OFF

ABC LLP

(On the letter Head)

-------------------------------------------------------------------------------------------------------------------------------

To,

MMMM

Sub: Authorization to make Application to Strike Off the Name of the LLP to ROC

Dear Sir,

With respect to the subject matter cited above, the management decides to authorize you to file an application to the ROC to strike off the name of the LLP from their register.

An application shall be moved with the required documents as follows:

1.      Application Letter

2.      Consent of all the partner,

3.      Indemnity bond/ undertaking

4.      Affidavit duly notarized

5.      Copy of statement of assets & liability duly certified

For ABC LLP

MMMMX

(Designated Partner)

NOW, WE SHALL DISCUSS THE IMPORTANT POINTS AFTER INTERPRETATION OF THE RELEVANT RULE WITH RESPECT TO STRIKING OFF THE LLP:

1. Where the Limited Liability Partnership is regulated under a special law, the application for removal of name shall be accompanied by approval of the regulatory body constituted or established under that law.

2. The contents of the notice issued the ROC and the application made by the LLP shall be placed on the website of the Ministry of Corporate Affairs for the information of the general public for a period of one month.

3. As discussed, in case of mandatory strike off, the Registrar shall send a notice to the LLP to give reasonable opportunity of being heard as to why the LLP shall not be dissolved. The correspondence of the said notice shall have to be made within a period of one month or else the Registrar shall strike its name off the register, and shall publish notice in the Official Gazette thereof.

4. The liability of the every designated partner of the LLP dissolved as such shall continue and may be enforced as if the LLP had not been dissolved.

As a Key Point : The date of cessation of commercial operation is the date from which the Limited Liability Partnership ceased to carry on its revenue-generating business and the transactions such as receipt of money from debtors or payment of money to creditors, subsequent to such cessation will not form part of revenue-generating business.

CS Annu Sharma is a Commerce Graduate and an Associate Member of the Institute of Company Secretaries of India (ICSI). She has cumulative experience of more than 3 years with Listed Company, CA and CS firms. She authored various articles on the topics of Corporate Laws, Securities Laws, DGFT, Income Tax, Start-ups among other. Articles authored by her are published on prominent Professional Websites.

Contact No . 7021848742

Email: csannusharma123@gmail.com 

Dear Folks 

Have a Great Day!

WHY TO GET A PAN NUMBER OR PAN CARD?

Obtaining PAN is may be optional or voluntary like passport, driving license, Aadhaar etc. However, its use is mandatory at required places, like PAN for high-value financial transactions, Driving License for motor driving, passport for foreign travel and more.

• For payment of direct taxes
• To file income tax returns
• To avoid deduction of tax at higher rate than due
• To enter into specific transaction such as:
• (a) Sale or purchase of immovable property value exceeding specified limit (b) Sale or purchase of a vehicle other than a two wheeler.
• Any mutual fund purchase.

WHO MUST APPLY FOR PAN- Permanent Account Number?

1. Anybody who earns a taxable income in India, including foreign nationals who pay taxes here.
2. Anybody who runs a business (be it retail, services or consultancy) that had total sales, turnover or gross receipt exceeding a specified limit in the previous financial year. (From December 5, 2018. The new rule has made it mandatory for all businesses with a net turnover/ gross income of up to Rs 2.5 lakh per year to have a PAN)

The most common word which affects the life professional, corporate and other people is PAN, in this advance era still people have question or myth that we don’t get salary from anywhere so we don’t require PAN Card. In this write-up we will have an insight under the concept of PAN Card .The primary objective of PAN is to use a universal identification key to track financial transactions that might have a taxable component to prevent tax evasion. The PAN number remains unaffected by change of address throughout India.

PAN, or permanent account number, is a unique 10-digit alphanumeric identity allotted to each taxpayer by the Income Tax Department under the supervision of the Central Board of Direct Taxes. It also serves as an identity proof. PAN Card is mandatory for financial transactions such as receiving taxable salary or professional fees, sale or purchase of assets above specified limits, buy mutual funds and more.

HOW TO APPLY?

1. Use 'Form 49A' or 'Form 49AA' as applicable to you. Find more details at incometaxindia.gov.in.
2. You can find the location of PAN card offices in any city from the websites of the Income Tax Department or National Securities Depository Limited (NSDL)or UTI Infrastructure Technology (UTIITL).
3. You will need copies of proof of Identity and address.
4. You can also apply online through websites of the I-T Department (Income Tax) or National Securities Depository Limited NSDL or UTI Infrastructure Technology (UTIITL).

WHICH FORM TO USE?
49A	49AA
Individual Citizens of India.	Individual who are not Indian Citizens
HUF-Hindu Undivided families.
Companies Registered in India.	Companies Registered outside India.
Associations Registered in India.	Firms Formed or Registered outside India.
Firms’, Including LLP’s Formed or Registered in India.	LLP’s Formed or Registered outside India.
Local Authorities

STRUCTURE OF YOUR PAN - PERMANENT ACCOUNT NUMBER

For illustration -A typical PAN is AFZPK7190M. The combination in which alphabet and numbers are arranged is explained further.

• First three characters i.e. "AFZ" in the above PAN are alphabetic series running from AAA to ZZZ.
• Fourth character of PAN i.e. "P" in the above PAN represents the status of the PAN holder. "P" stands for Individual, "F" stands for Firm, "C" stands for Company, "H" stands for HUF, "A" stands for AOP, "T" stands for TRUST etc.
• Fifth character i.e. "K" in the above PAN represents first character of the PAN holder's last name/surname.
• Next four characters i.e. "7190" in the above PAN are sequential number running from 0001 to 9999.
• Last character i.e. "M" in the above PAN is an alphabetic check digit.

A pan card is required for a lot of purposes thus making it an extremely valuable and indispensable part of most people lives. The likeliness of PAN identity theft has grown with the growing importance of PAN. Merely safeguarding the physical copy cannot prevent misuse. Information can be misused very easily for benami property transactions or purchase of tickets of high value, as a majority of transactions demand simply quoting of the PAN or a photocopy of the PAN Card. Thus, a copy of your PAN card or its number could be quoted in transactions that you are not even a part.

Specially for Companies incorporated/registered these days are in a very comfort zone as PAN and TAN is allotted to them on immediate basis every company registered in India is mandatory to have a PAN Number , Now by simplified approach companies get there PAN printed of Certificate of Incorporation of a Company, it also helps to open bank account very fast in case of Company.

Company Registration has got one feather by this instant TAN and PAN allotment.

{The author is a Company Secretary  and can be reached at (M) 7021848742and (E) csannusharma123@gmail.com}

CS Annu Sharma is a Commerce Graduate and an Associate Member of the Institute of Company Secretaries of India (ICSI). She has cumulative experience of more than 3 years with Listed Company, CA and CS firms. She authored various articles on the topics of Corporate Laws, Securities Laws, DGFT, Income Tax, Start-ups among other. Articles authored by her are published on prominent Professional Websites.

HUF as a Tax Planing Device

As our finance budget is recently announced why not to start planning about Tax specially Income Tax as Indirect tax GST (Good & Simple Tax) is already taking away our savings, our discussion for the day will be how to save more tax by forming Hindu Undivided Family (HUF) .

In legal language Hindu Undivided Family ('HUF') is treated as a 'person' under section 2(31)of the Income-tax Act, 1961 (herein after referred to as 'the Act'). HUF is a separate entity for the purpose of assessment under the Act

First of all “HUF Meaning “

The Income Tax Act 1961 provides that a HUF (Hindu Undivided Family) is separate unit like an individual and is too assessed accordingly. A HUF is eligible for those exemptions that are available to a resident Indian who is not a senior citizen. It can own property and also have its own business.
Income Tax Act, 1961 provides legal opportunities to save Income tax; it will not be prudent if you are not taking benefits of such provisions.

 HUF is an entity, which has been given certain exemptions, quite similar to an Individual by the IT Act. If you are a born Hindu or a Sikh or a Buddhist or a Jain, you can take benefit of these provisions, and if possible you should take it.

Now what does it includes?

The HUF includes those persons who, by birth, acquire an interest in some joint family property. It also includes all lineal descendants of these persons, and their wives, and children, both sons and daughters. Even married daughters can remain a part of the HUF, while being a member of her spouse’s family HUF.


Most important: - Benefits

To understand the income tax benefits let us take an example of a family, which is now common, the nuclear family.
Rahul is married to Bhawna and have two minor children, Prabha (daughter) and Rajat (son). Rahul’s annual income is Rs. 20,00,000 and Priya Rs. 20,00,000. Rahul has inherited an ancestral property, an apartment, which is on rent (annually Rs. 12,00,000).

If Rahul forms a HUF, with him the Karta (head of the HUF), his children will be called coparceners and his wife will be a member. The first benefit Rahul, will have that the rent income of Rs. 12,00,000 which was hitherto assessed as part of his income and now be carved out and shown as HUF income, and the HUF will be assessed separately as another entity and will have the benefit of the exemptions of IT Act similar to those received by Rahul.

This will lead to substantial reduction of Income tax being hitherto paid by Naresh and the HUF will pay a much smaller amount of Income tax on this income of Rs. 3,00,000/- after enjoying the exemptions available. Also, the gifts received by the coparceners/member(beyond the exemption limit) can be shown as received by the HUF, thereby reducing the income tax burden of both Naresh and Priya.

Now, you may invest the HUF income in LIC policies, PPF accounts, ELSS instruments in the name of Karta, coparceners or member of the HUF and it will get the income tax deductions under Section 80C.

How to form a HUF?

The following steps are required to form a HUF:

 Prepare a Notarized stamp paper as an affidavit for forming an HUF.

 Then apply for PAN (Permanent Account Number) from the income tax authorities with a rubber stamp, ID Proof, residence proof and the proof of the members of the family of HUF.

 The rubber stamp should be rectangular carrying the name of the HUF and that of the Karta

 Open a bank account in the name of Hindu Undivided family titled “Aditya& Sons HUF” Transfer the rent income received from the ancestral property along with the excess gift amount received by the HUF members (Karta, coparceners and members)

Who should actually form a HUF?
HUF will be a good option for persons who have sufficient income and savings and who also have some ancestral property too (which could be treated as family assets for HUF). Before forming a HUF one should calculate the tax benefits clearly and then take a calculated decision.
It is advisable to hire a financial advisor, well versed in forming HUF and who will be able to give the pros and cons so that an informed decision can be taken about formation of HUF.

Disadvantages of HUF
Though a significant amount of tax can be saved by forming a HUF, there are few disadvantages of HUF which should be taken into consideration. Whenever an asset is transferred to HUF it remains with it. Only when the coparceners will demand a partition of HUF, the property can be shared by the coparceners.

HUF property cannot be mentioned in the WILL. In case of Tarun HUF, the ancestral property transferred to HUF will remain part of HUF and Tarun later cannot transfer to his wife or son or daughter. Of course after his death, his son will become the Karta, but other members will enjoy the benefits and income of the HUF.

Conclusion of our discussion: This was just a brief piece of my understanding; HUF is more and vaster:- to be continued till my next writing: