Strike Off LLP vs. Dissolution of LLP: Understanding the Difference

[Ishita Ramani]

When it involves finishing the existence of a Limited Liability Partnership (LLP) in India, the terms Strike Off and Dissolution are frequently used interchangeably. 

Understanding the differences between Strike Off LLP and Dissolution of LLP is important for business proprietors who need to close their LLP properly.

What is Strike Off LLP?

The Strike Off LLP technique refers back to the elimination of an LLP’s call from the check-in maintained by the Ministry of Corporate Affairs (MCA). This movement is commonly taken whilst the LLP is inactive or not operational. The system is relatively easy and can be initiated via the LLP or the Registrar of Companies (ROC).

The most common reasons for striking off an LLP encompass:

• Non-compliance with statutory filing requirements
• Non-conduct of enterprise for an extended length
• Failure to document annual returns or monetary statements

To strike off an LLP, an application has to be made in Form 24 to the MCA. Before making use of it, the LLP have to clean all pending dues, record past due returns, and settle any liabilities. Once the software is authorized, the LLP’s name is removed from the official sign-up, and the LLP ceases to exist.

What is Dissolution of LLP?

Dissolution of LLP refers back to the formal criminal procedure of finishing the life of an LLP. Dissolution is frequently selected when the partners determine to stop the commercial enterprise completely and liquidate its affairs.

The dissolution manner can occur in ways:

Voluntary Dissolution: When all partners comply with dissolve the LLP and skip a resolution.
Compulsory Dissolution: When the LLP is ordered to dissolve by way of the court docket because of diverse reasons, which include insolvency or misconduct.

For voluntary dissolution, the LLP should report Form 24 and observe the procedures outlined in the LLP Act. 

Key Differences Between Strike Off LLP and Dissolution of LLP

Procedure: Strike Off is simpler and administrative, whilst Dissolution is extra complete, related to asset liquidation and debt agreement.

Reasons: Strike Off takes place due to inaction or non-compliance; Dissolution happens voluntarily by way of partners or via a courtroom order.

Legal Implications: Strike Off ends the LLP with out liquidating property, at the same time as Dissolution consists of asset liquidation and legal responsibility settlement.

Required Documents: Strike Off wishes Form 24, while Dissolution calls for extra files like resolutions and asset distribution info.
 

Time Frame: Strike Off is faster, whilst Dissolution takes longer because of asset winding-up.

Conclusion

While each Strike Off LLP and Dissolution of LLP lead to the closure of a business, the selection among the 2 depends on the LLP’s monetary scenario, compliance records, and whether or not the partners need to formally land up the business. If the LLP has no huge liabilities or assets, Strike Off is the less difficult and faster alternative.