LLP Strike Off with No Tax Returns Filed

Introduction

LLP company registration in India has gained immense popularity as a form of business in recent years. LLPs provide the benefits of limited liability to its partners and offer them greater flexibility in terms of operations and compliance. However, like any other form of business, LLPs are also subject to various compliance requirements under the LLP Act, 2008. In this blog, we will learn how to avoid LLP strike-off for Limited Liability Partnership when no Tax Return is filed.

What is an LLP Strike Off?

LLP strike-off is a process by which the Registrar of Companies (RoC) removes the name of the LLP from its register. This happens when the partnership fails to comply with the provisions of the LLP Act, 2008, or any other applicable law. It is a serious matter and can have far-reaching consequences for the partners and the business.

Consequences of LLP Strike Off

The consequences of a Limited Liability Partnership (LLP) strike Off can be severe and can affect the partners of the LLP, as well as the business and its creditors. Some of the consequences include:

1. Loss of legal status: Strike off of an LLP can result in the loss of legal status of the business entity, which means that the LLP is no longer recognized as a separate legal entity from its partners. The partners will become personally liable for any debts and obligations of the LLP.
2. Liability of partners: The partners of the LLP will be held personally liable for all the obligations of the LLP, including its debts and liabilities, which can result in financial losses for the partners.
3. Impact on credit score: Striking off an LLP will negatively impact the credit score of the partners and can affect their ability to secure loans or credit in the future.
4. Legal action by creditors: Creditors of the LLP can initiate legal action against the partners to recover their dues. The partners may also be held liable for any legal costs incurred by the creditors.
5. Negative impact on reputation: Striking off an LLP can have a negative impact on the reputation of the partners, as it may indicate financial instability and lack of business continuity.
6. Disqualification of partners: The partners may be disqualified from being a partner in any other LLP or company for a period of five years, as per the provisions of the LLP Act, 2008.
7. Inability to carry out business activities: Once an LLP is struck off, it cannot carry out any business activities or transactions. This can have a significant impact on the partners who rely on the business for their livelihood.
8. Difficulty in reviving the LLP: It can be difficult and time-consuming to revive an LLP that has been struck off, as it requires compliance with various legal and procedural requirements.

Avoiding LLP Strike Off

LLPs can avoid strike-off by complying with the provisions of the LLP Act and other applicable laws. The following are the necessary steps to avoid the strike-off of an LLP with no tax returns filed:

Step 1: File Pending Tax Returns: The first step to avoid an LLP for striking off is to file all pending tax returns with the Income Tax Department. LLPs are required to file an annual return in Form 11 and a statement of accounts and solvency in Form 8 with the RoC. In addition, they are also required to file income tax returns with the Income Tax Department. Failure to file tax returns can lead to the imposition of penalties and interest, and can also result in the disqualification of the LLP and its partners. 

 Step 2: Pay Outstanding Dues:  LLPs are required to pay all outstanding dues, including taxes, penalties, and interest, to avoid the striking-off process. The LLP should ensure that all the dues are paid before applying for striking off. In case the LLP is unable to pay the outstanding dues, it can approach the Income Tax department or the RoC for a waiver or a payment plan.

Step 3: Apply for Strike-Off: Once all the pending tax returns are filed, and all outstanding dues are paid, the LLP can apply for the process of striking off with the RoC. The application for it should be made in Form 24, along with the necessary documents, such as the consent of all partners, and a statement of assets and liabilities. The RoC will verify the application and, if satisfied, will strike off the name of the Limited Liability Partnership from its register.

Conclusion

LLP strike-off is a serious matter that can have far-reaching consequences for the partners and the business. Therefore, LLPs must ensure compliance with all the provisions of the LLP Act and other applicable laws, including the timely filing of tax returns. Failing to do so can result in penalties, interest, disqualification, and ultimately, LLP strike-off.