Starting a business is a big step but knowing when and how to close one is equally important. If you’ve registered a Limited Liability Partnership (LLP) or a Private Limited Company registration, but operations never took off or have been discontinued, it’s crucial to formally close the business with the Ministry of Corporate Affairs (MCA). Keeping a dormant entity without compliance can lead to unnecessary penalties, annual filing obligations, and legal consequences.
This article walks you through the closure process for non-operational LLP and companies, including applicable laws, sections, procedures, documents required, and answers to frequently asked questions.
Why Close a Non-Operational Business?
If your LLP or company is inactive and has no income, no assets, no liabilities, and you don’t plan to revive it in the future, it’s advisable to shut it down legally. Here’s why:
- Avoid penalties for non-filing of annual returns and financial statements.
- Stop incurring statutory costs, such as auditor’s fees, compliance filings, and taxes.
- Reduce the risk of being blacklisted or disqualified as a director/designated partner.
- Maintain a clean record for future entrepreneurial ventures.
Legal Provisions for Closure
1. Closure of LLP:
- Governed by the Limited Liability Partnership Act, 2008
- Closure through Form 24 (Voluntary Striking Off)
- Rule 37 of LLP Rules, 2009 covers the procedure for striking off the name
2. Closure of Company (Private/Public):
- Governed by the Companies Act, 2013
- Closure through Fast Track Exit (FTE) using Form STK-2
- Relevant provision: Section 248(2) of the Companies Act, 2013
- Companies (Removal of Names of Companies from the Register of Companies) Rules, 2016
Conditions for Closure: LLP
You can apply for LLP closure if:
- The LLP has not carried on any business since incorporation or has been inactive for at least one year.
- There are no assets or liabilities.
- All designated partners have given their consent.
- All statutory returns are up-to-date, or applicable waivers/clarifications are obtained.
Conditions for Closure: Company
A company is eligible for voluntary company closure if:
- It has not commenced business since incorporation or has not been operational for at least two years.
- It has no outstanding liabilities.
- It has not filed for revival under the Insolvency and Bankruptcy Code (IBC).
- It has filed all pending statutory returns, such as AOC-4 and MGT-7.
Documents Required for Closure of LLP
- Form 24 (Application for Strike Off)
- Consent of all partners in prescribed format
- Indemnity bond (on stamp paper) and affidavit from designated partners
- Statement of accounts certified by a CA (not older than 30 days)
- Copy of ITR acknowledgment or NIL ITR
- Copy of resolution authorizing closure
- No Objection Certificate (NOC) from creditors, if any
Documents Required for Closure of Company
- Form STK-2 (Application for Strike Off)
- Board resolution and special resolution (if required)
- Indemnity bond (STK-3) and affidavit (STK-4) by all directors
- Statement of accounts certified by a Chartered Accountant
- NOC from regulatory authority, if governed under special law (like NBFCs)
- Copy of PAN, MOA/AOA, and Certificate of Incorporation
- Consent letter from all directors
Step-by-Step Process for LLP Closure
Step 1: Pass resolution
Designated partners must approve closure and authorize one partner to file Form 24.
Step 2: Prepare documentation
Get affidavits, indemnity bond, CA-certified statement of accounts, and PAN.
Step 3: File Form 24
Submit documents to MCA portal with the applicable fee.
Step 4: Registrar’s verification
The Registrar of Companies (RoC) will verify and may raise queries.
Step 5: LLP struck off
If everything is in order, the LLP is removed from the register, and a notice is published.
Step-by-Step Process for Company Closure (FTE Mode)
Step 1: Board and shareholder resolutions
Hold board meeting and pass special resolution (or 75% shareholder consent in writing).
Step 2: File pending forms (if any)
Ensure AOC-4 and MGT-7 filings are done before applying.
Step 3: Prepare closure documents
Includes indemnity bonds, affidavits, statement of accounts, etc.
Step 4: File Form STK-2
File the application with MCA along with the prescribed fee of ₹10,000.
Step 5: RoC scrutiny and approval
RoC may raise queries or ask for additional documents before publishing notice of strike-off.
Government Fees
| Form | Entity Type | Government Fee |
|---|---|---|
| LLP Form 24 | LLP | ₹500 |
| STK-2 | Company | ₹10,000 |
Note: Professional fees for CA/CS may vary additionally based on your consultant.
Timelines
- LLP Closure: Around 2 to 4 months
- Company Closure (FTE): Around 3 to 6 months
Timelines may extend if the RoC raises objections or there are pending compliances.
Consequences of Not Closing an Inactive Business
- Directors/Partners may be disqualified under Section 164(2) of the Companies Act.
- Late filing fees under MCA increase to ₹100/day/form, with no upper cap.
- Income Tax and GST departments may send notices for non-filing.
- Auditor appointments and annual compliances still become applicable.
- MCA may initiate suo-moto strike off, but this carries risks like penalties or inability to start another business.
FAQs on Closure of LLP and Company
Q1. Can I close my LLP if it has a bank account but no transactions?
Yes, but you must close the bank account first and obtain a bank closure letter as proof. LLP should also not have any assets or liabilities.
Q2. What if the LLP has not filed annual returns?
You need to file overdue returns or apply for condonation. In some cases, if inactive since incorporation, you can apply with a declaration of non-operation.
Q3. Do I need to hire a Chartered Accountant for LLP or company closure?
Yes. A CA must certify the final statement of accounts. Additionally, a CS or CA may assist in preparing forms and filings.
Q4. Can a dormant company be closed under Fast Track Exit?
Yes. A dormant company under Section 455 of the Companies Act, 2013 can be struck off voluntarily using Form STK-2, provided it meets other conditions.
Q5. Is DIN required to be active for closure?
Yes. Directors must have active DIN (not disqualified or deactivated) to sign affidavits and forms.
Q6. Will GST or PAN registration be cancelled automatically?
No. You must separately cancel GST registration on the GST portal and surrender PAN to the Income Tax Department, if required.
Q7. Can I revive a company after closure?
Once the company or LLP is struck off, it can be revived within 20 years by filing an appeal with NCLT under Section 252.
Conclusion
LLP Closure or company is more than just ceasing operations — it’s a legal process that must be carried out responsibly. If you’re running a non-operational business, avoid letting it stay idle and accumulating penalties. The voluntary strike-off route under the LLP Act and Companies Act is straightforward, cost-effective, and helps you maintain your reputation as a compliant entrepreneur.
If you’re unsure about the closure process, partnering with a legal or compliance firm like Compliance Calendar LLP can help you with documentation, filings, and smooth closure — saving you from future legal and financial complications and Learn More. …