How to Address Outstanding Liabilities Before LLP Strike Off?

What Does “Addressing Outstanding Liabilities” Mean?

This means you must pay off all the money your LLP owes before you apply to close it using Form LLP-24. These unpaid amounts can include:

• Government payments like fees, penalties, GST, and income tax
• Payments to suppliers, service providers, or consultants
• Employee payments like salaries, bonuses, or provident fund
• You must fully repay loans from banks or financial institutions and close them with a No Objection Certificate (NOC)
• Ongoing legal cases: your LLP can’t be closed if it’s involved in any court cases
• Rental or lease agreements: Make sure you properly end all office leases or licenses before closing the LLP.

The authorities may reject your closure application if you don’t clear the dues, and they could even send legal notices to the partners or involve them in legal issues after the LLP is closed.

Benefits of Closing the LLP After Clearing Dues

• Official Closure: Once the LLP is closed properly, you won’t have to deal with future government filings or notices.
• No Loose Ends: Clearing all pending payments before closing keeps the partners safe from future legal or financial issues.
• Saves Money: You don’t have to pay for digital signatures, audits, or filing fees anymore.
• No More Paperwork: You’re free from filing forms like Form 8, Form 11, or income tax returns every year.
• Good Impression: Closing the LLP the right way shows you’re responsible, which helps if you start a new business later.

Steps to Close an LLP After Clearing Dues

• Clear All Dues: Pay all outstanding bills, taxes, loans, and employee dues. No unpaid liabilities must remain.
• File Any Pending Returns: Submit all pending filings like Form 8, Form 11, ITR, and GST returns before applying for strike off.
• Close the Bank Account: Shut down the LLP’s account officially and obtain a closure confirmation letter from the bank.
• Prepare Final Accounts: Prepare latest financial statements, certified by a Chartered Accountant (CA).
• Create Required Legal Papers: Draft affidavits and indemnity bonds, signed and notarized by all partners.
• Get NOC from Creditors (If Any): Obtain No Objection Certificates from creditors confirming no dues are pending.
• File LLP Form 24: Upload all required documents on MCA portal and file the strike-off form.
• Pay Filing Fees: Pay applicable fees during Form 24 submission on MCA portal.
• Wait for Review by RoC: Respond to any queries from the Registrar of Companies until final approval.
• LLP is Officially Closed: Once approved, your LLP will be legally struck off from MCA records.

Required Documents for LLP Strike Off (After Clearing Liabilities)

Disadvantages of Closing an LLP

• Hard to Undo: Once struck off, reopening the LLP requires special court approval.
• Setup Costs Might Feel Wasted: You might feel the setup costs were wasted if the LLP didn’t carry out any business.
• You’re Still Responsible for Unpaid Dues: Partners can face action later for missed liabilities.
• It Can Take a While: Closure may take 3 to 6 months even if everything is correct.
• Small Mistakes Can Cause Delays: Incomplete documents or errors can delay or reject the process.

Things to Remember After Closing you LLP

• You can’t run business, use the name, or operate the LLP’s bank account after closure.
• Authorities can reopen the LLP if future dues or legal disputes arise.
• Keep closure certificates and paperwork safe for at least 8 years.
• The status will show as “Struck Off” on the MCA website.

Common Mistakes to Avoid When Closing Your LLP

• Not closing the LLP’s bank account before filing Form 24.
• Submitting outdated or unaudited financial statements.
• Failing to file Form 8, Form 11, or ITR before applying.
• Skipping CA verification of accounts – a mandatory step.
• Many people think LLPs close inactively, but they do not.

When You Can’t Close (Strike Off) Your LLP

• If ongoing legal cases involve the LLP.
• If active contracts like rentals or employment still exist.
• If any government dues or taxes are unpaid.
• If insolvency or liquidation proceedings have begun.
• If you haven’t filed returns in the past year.
• If even one partner disagrees with the closure.

Conclusion

Before you apply to close your LLP, you must clear all outstanding bills and dues. Many LLPs face rejection because they skip this crucial step or wrongly assume that being inactive means they owe nothing. The government requires proof that you have settled everything before approving the closure. Even after closing the LLP, authorities can reopen the case if any unpaid dues come up later. To avoid fines or legal troubles, it’s best to get help from experts and follow the proper process to close your LLP.

Suggested Read :

Important Rules for LLP Strike Off
LLP Strike Off Procedure
LLP Strike Off  Vs Winding Up
FAQs on LLP Strike Off?
LLP Strike Off with Inactive Bank Accounts

FAQs