Filing LLP Form 24: How to Close Your LLP in India

Form URC-1

Form URC-1, also known as the "URC 1 form", is an e-form prescribed under Rule 3(2) of the Companies (Authorised to Register) Rules, 2014. It enables various business entities, including partnerships, LLPs, societies, and others, to register as companies under Section 366 of the Companies Act, 2013. The form plays a crucial role in facilitating the formal registration process when an entity decides to transform its business structure into a company.

Filing Form URC-1 is mandatory for entities opting to convert into a company under the provisions of the Companies Act. It captures comprehensive details about the existing entity, the proposed company, and the compliance requirements for a smooth transition. By submitting this form, entities can initiate the company registration process and ensure adherence to the legal framework governing such conversions.

What is Section 366 of the Act?

Section 366 of the Companies Act, 2013 is a pivotal provision that allows various business entities, such as partnerships, LLPs, and societies, to register as companies under the Act. A significant amendment to this section, based on the recommendations of the Company Law Committee, reduced the minimum member requirement from seven to two, making it easier for smaller entities to convert into companies.

The scope of Section 366 has evolved since its introduction in the Companies Act, 1956. The 2017 amendments aimed to widen the eligibility criteria for registration, enabling more businesses to benefit from the advantages of operating as a company. This provision offers a streamlined pathway for entities formed under other laws to transition into the corporate structure governed by the Companies Act.

By registering under Section 366, entities can enjoy benefits such as limited liability protection, better access to capital, and enhanced credibility in the market. The provision creates a bridge between different legal frameworks, allowing businesses to adopt a more formal and regulated structure that aligns with their growth aspirations.

Companies that can be Registered under Section 366

Section 366 of the Companies Act, 2013 allows a wide range of entities to register as companies, including:

• Partnership firms
• Limited Liability Partnerships (LLPs)
• Cooperative societies
• Societies registered under the Societies Registration Act, 1860
• Any other business entity formed under other laws

These entities must have a minimum of two members to be eligible for registration under Section 366. They can convert into companies limited by shares, guarantee, or as unlimited companies.

It's important to note that Section 366 applies to entities originally formed under laws other than the Companies Act. It provides a pathway for these businesses to transition into the corporate structure and operate under the purview of the Companies Act, 2013.

This provision provides a legal pathway for such organisations to adopt a corporate structure, enabling them to operate under a more regulated framework while enjoying benefits like limited liability, perpetual succession, and enhanced legal status.

Purpose of Form URC-1

The primary purpose of Form URC-1 is to facilitate the registration of certain entities, such as partnerships, LLPs, and societies, as Part I Companies under the Companies Act, 2013. When an entity has seven or more members, Form URC-1 is filed along with Form INC-7 to initiate the company registration process.

Form URC-1 simplifies the online registration procedure by capturing all the necessary details and documents required for the conversion. It serves as a comprehensive application form that enables entities to provide information about their existing structure, proposed company details, and compliance with the legal requirements.

By filing Form URC-1, entities can ensure a smooth transition from their current legal status to a company registered under the Companies Act. The form helps in maintaining transparency and accuracy in the registration process, as it requires the submission of relevant documents and disclosures.

For entrepreneurs and startups, Form URC-1 acts as a practical tool, guiding them through the registration process and helping them understand the documents and disclosures needed for conversion.

Key Amendments and Implications

The Companies (Authorized To Register) Amendment Rules, 2023, introduced several significant changes to Form URC-1. The amended form now requires additional details, including:

The amendments aim to strengthen the due diligence process and ensure that all relevant information is disclosed during the registration process. By mandating the submission of these details, the MCA seeks to enhance the integrity and reliability of the information provided by the entities seeking to convert into companies.

The implications of these amendments are significant for entities considering registration under Section 366. They must ensure compliance with the new disclosure requirements and maintain proper documentation to support their application. The increased transparency and disclosures help in preventing any misrepresentation or concealment of material facts during the registration process.

Entities should carefully review the amended Form URC-1 and ensure that they have all the necessary information and documents ready before initiating the filing process.

Attachments to be submitted for Form URC-1

The amended Form URC-1 requires several mandatory attachments to be submitted along with the application. These documents provide supporting evidence and ensure compliance with legal and regulatory requirements. The key attachments include:

• Particulars of members/partners: A list of all members or partners of the existing entity, along with their details and shareholding pattern.
• Declaration by directors: A declaration by two or more proposed directors of the company, verifying the particulars of all members/partners.
• Affidavit for dissolution: An affidavit from all members/partners, confirming the dissolution of the existing entity.
• Instrument constituting the entity: A copy of the partnership deed, LLP agreement, or other instrument constituting or regulating the existing entity.
• Certificate of registration: A copy of the certificate of registration of the existing entity, issued by the relevant authority.
• No Objection Certificates (NOCs): NOC from any sectoral regulators or authorities, if applicable, depending on the nature of the business and the sector in which it operates
• Newspaper advertisement: A copy of the newspaper advertisement published in a English and a vernacular language newspaper, giving notice of the proposed registration.
• Compliance certificate: A certificate from a practicing professional (CA/CS/CWA), confirming compliance with the provisions of the Stamp Act, to the extent applicable.
• Consent of majority members: A resolution passed by a majority of members, agreeing to the registration of the entity as a company.
• Statement of Accounts: Optionally, a statement of accounts and a valuation report determining the value of assets and liabilities of the existing entity

These attachments provide critical information about the existing entity, its members, and the proposed company. The affidavit from members ensures their consent and commitment to the conversion process. NOCs from regulatory authorities help in identifying any sector-specific compliance requirements or approvals needed for the conversion. The consent and declarations from the first directors establish their eligibility and willingness to take on the responsibilities of directors in the newly registered company. The copies of incorporation documents and constitutional papers provide proof of the existing entity's legal status and governance framework.

Entities should ensure that all the required attachments are duly prepared, signed, and submitted along with Form URC-1. Incomplete or missing attachments may lead to delays or rejection of the registration application. It is advisable to maintain proper records and documentation to support the information provided in the form and the attachments.

Frequently Asked Questions

What is Form 11 and How to File It? 

Form 11 is an Annual Return of LLP. Every LLP in India must file with the Registrar of Companies (RoC) under the Limited Liability Partnership Act, 2008. It serves as a comprehensive summary of the LLP's management and structure for the financial year.

Here’s what Form 11 LLP typically includes:

1. General Information:
   
   • LLP Name.
   • LLP Identification Number (LLPIN).
   • Date of Incorporation.
2. Partner Information:
   
   • Names and details of designated and other partners.
   • Changes in partnership during the financial year, such as additions, resignations, or reassignments.
3. Contribution Details:
   
   • The total contribution received by the LLP from partners.
   • Contributions made by individual partners during the year.
4. Declaration of Compliance:
   
   • A confirmation that the LLP has met its statutory obligations during the year.

Steps to File Form 11

Filing Form 11 is a straightforward process. Follow these steps to ensure compliance:

1. Download Form 11:

Visit the Ministry of Corporate Affairs (MCA) portal and download the latest version of Form 11.

2. Fill in Basic Details: 

Provide the LLP’s basic details, including:

• LLPIN.
• Date of Incorporation.
• Business activities during the financial year.

3. Enter Partner Information:
   
   • List all designated and non-designated partners.
   • Include details of any changes in partnership, such as additions or removals.
4. Attach Supporting Documents:

Upload any supporting documentation, including agreements or resolutions, if applicable.

5. Certify the Form:

Ensure the form is digitally signed by one of the designated partners using a Digital Signature Certificate (DSC).

6. Submit on MCA Portal:

Upload the completed form and pay the prescribed filing fee. Fees depend on the LLP’s total contribution as per the LLP Agreement.

Due Date for Filing Annual Return (Form 11)

The due date for filing Form 11 is May 30 every year, covering the financial year ending on March 31.

Important Note:

• Filing Form 11 is mandatory regardless of whether the LLP has started its business. Even dormant LLPs are required to submit their annual return.

If you don’t file before Form 11 LLP’s due date, you can be penalised, so it's crucial to adhere to the timeline.

Additional Fee (Penalty) for Belated Filing of Annual Return (Form 11)

Failure to file Form 11 on or before May 30 can lead to significant financial penalties and legal complications. 

• A penalty of LLP form 11 late fee of ₹100 per day is imposed for each day the filing is delayed.
• The penalty has no upper limit, which means prolonged delays can result in substantial fines.

Continued non-compliance may lead to the LLP being marked as inactive by the RoC. While the designated partners may face disqualification from holding similar roles in other companies or LLPs.

What Are The Prerequisites?

Before filing, ensure that you’re fulfilling certain Form 11 LLp requirements:

1. The LLP is registered and has an active status on the MCA portal.
2. A valid DPIN of the Partner.
3. A Digital Signature Certificate (DSC) is available for at least one designated partner.
4. All pending compliance forms, such as Form 3 (LLP Agreement), have been filed.

What Are the Documents to be Submitted Along with Form 11?

Depending on the changes or updates during the year, the following documents are required for Form 11 LLP submission:

1. List of Partners:

A detailed list of designated and other partners, including their roles and contributions.

2. Contribution Proof:

Evidence of the capital contributed by each partner during the financial year.

3. Supporting Agreements:

Copies of resolutions or amendments to the LLP Agreement, if applicable.

4. Additional Documents:

Any other documents as required by the MCA portal based on the LLP’s activities.

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Important Aspects to Note While Filing Annual Return for LLP

While LLP annual filling might seem straightforward, there are key details and considerations that can make a big difference. Overlooking these aspects could lead to errors, delays, or unnecessary penalties. To help you navigate this process smoothly, here are some important points to remember while filing your LLP’s annual return.

1. Accuracy of Partner Details:

Ensure the names, roles, and contributions of all partners are correctly listed, as discrepancies can lead to rejections or penalties.

2. Difference Between Forms:

Do not confuse Form 11 for LLP with Form 8, which deals with the financial health and solvency of the LLP. Both must be filed annually.

3. Digital Signature Validity:

Verify the validity of the Digital Signature Certificate (DSC) before submission to avoid technical issues.

Certification in Annual Return (Form 11)

Certification plays a crucial role in the filing of Form 11 (Annual Return) for an LLP. It ensures that the information provided is accurate and compliant with the statutory requirements. 

While the form can be filed by the designated partner(s), certain conditions require additional certification by a practising professional, such as a Company Secretary.

When is Certification Required?

For LLPs meeting certain financial thresholds, certification of Form 11 by a professional ( Company Secretary) is mandatory:

• If the LLP’s contribution exceeds ₹50 lakhs, or
• If its turnover exceeds ₹5 crores,

Frequently Asked Questions

Difference between Private Limited and One Person Companies

Although we will explore each legal structure in the upcoming sections, let's currently delve into a comparative analysis between these two entities.

While we have provided some context on the differences between a private limited company and an OPC, let's break down their features and registration process in detail. This will help you figure out which one suits your business needs best.

What is a Private Limited Company?

A Private Limited Company (Pvt Ltd) is one of the most sought-after business structures in India. It combines the benefits of limited liability, a separate legal identity, and scalability.

It’s a privately held entity governed by the Companies Act of 2013 and is often chosen for its ability to combine the flexibility of partnerships with the advantages of corporate status.

In a Private Limited Company, shareholders' liability is limited to the extent of their shareholding, which means personal assets are protected in case the company incurs losses or debts. This makes it an attractive option for entrepreneurs looking to build a scalable business while minimising financial risks.

In short, a Private Limited Company is ideal for entrepreneurs with big ambitions, as it provides:

• A formal structure for business operations.
• Easier access to funding through equity or debt.
• A professional image that boosts credibility with investors and customers.

Private Limited Company Registration

Registering a Private Limited Company involves a detailed process governed by the Companies Act, 2013.

Step-by-Step Guide to Registration

1. Document Requirements:
   
   • PAN and Aadhaar of all directors.
     
   • Proof of address for both directors and the company (rental agreement, utility bills, etc.).
     
   • Digital Signature Certificate (DSC) for directors.
     
2. Name Reservation:
   • Apply to the Ministry of Corporate Affairs to reserve a unique company name. This is done using the SPICe+ (Simplified Proforma for Incorporating Companies Electronically) Part A.
     
3. Drafting MOA and AOA:
   
   • Memorandum of Association (MOA): Outlines the company’s objectives and scope of operations.
     
   • Articles of Association (AOA): Governs the company’s internal management.
     
4. Filing Incorporation Application:
   
   • Submit the SPICe+ Part B form along with MOA and AOA to the ROC.
     
   • Articles of Association (AOA): Governs the company’s internal management.
     
5. Certificate of Incorporation:
   
   • Upon approval, the ROC issues a Certificate of Incorporation, officially recognising the company.
     

The process usually takes 10–15 working days, provided all documents are in order.

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Key Features of Private Limited Company

Here are some Private limited company features:

• Ownership Structure: Owned by shareholders, managed by directors (who can also be shareholders).
• Liability of Shareholders: Limited to the amount of unpaid shares they hold.
• Capital Requirements: There is no minimum capital requirement; businesses can start with as little as ₹1 lakh authorised capital.
• Perpetual Succession: The company exists independently of its owners' or directors' status.
• Limited Liability: Shareholders’ liability is restricted to the amount invested.
• Ease of Fundraising: Can raise capital from angel investors, venture capitalists, or private equity.
• Tax Implications: Subject to corporate tax rates, including additional surcharges and cess, based on annual income.

What is a One Person Company?

Introduced under the Companies Act of 2013, a One Person Company (OPC) is a simplified corporate structure designed for solo entrepreneurs.

As the name suggests, it allows a single individual to own and operate a business while enjoying the benefits of limited liability and corporate status. OPCs are particularly suited for small businesses, consultants, and freelancers who want to step up from a sole proprietorship and gain a formal business identity.

The OPC structure is a bridge between sole proprietorship and private limited companies. It combines the flexibility of running a solo business with the legal and financial protections of a company, making it a popular choice for first-time entrepreneurs.

One Person Company Registration

The process is designed to be straightforward and entrepreneur-friendly, ensuring that individuals can easily transition from a sole proprietorship or informal business setup to a legally recognised company.

Step-by-Step Guide to Registration

1. Document Requirements:
   
   • PAN, Aadhaar, and proof of address of the sole shareholder/director.
     
   • Nominee details.
     
   • Digital Signature Certificate (DSC).
     
2. Name Reservation:
   • Reserve a unique name for the OPC via the MCA portal through SPICe+ Part A.
     
3. Filing Application:
   
   • Submit the incorporation form, i.e. SPICe+ Part B with MOA and AOA, to the ROC.
     
4. Certificate of Incorporation:
   
   • Receive the Certificate of Incorporation after approval.
     

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Key Features of OPC

Here are some One person company features:

• Ownership Structure: The ownership is held by one individual, with the provision to nominate another person as a successor in case of the owner’s demise.
• Liability of the Shareholder: The shareholder’s liability is limited to the unpaid value of their subscribed capital.
• Capital Requirements: There is no minimum capital requirement, making it easier for individuals to start with minimal resources.
• Ease of Formation: Streamlined setup and management processes.
• Lower Compliance Costs: Fewer filings and regulatory requirements.
• Limited Liability: Protects personal assets.
• Tax Implications: OPCs are subject to the same corporate tax rates as Private Limited Companies. However, they enjoy lower compliance costs and simplified tax filings.

Similarities between OPC and Private Limited Company

1. Limited Liability Protection: Both structures ensure the owner’s liability is restricted to their investment.
2. Legal Entity: Both are considered separate legal entities distinct from their owners.
3. Compliance with ROC: Both require periodic filings with the Registrar of Companies.
4. Taxation: Both are subject to corporate tax rates.

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Our package includes:

• Company Name Registration
• 2 Digital Signature Certificates (DSCs)
• 2 Directors’ Identification Numbers (DINs)
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• MoA & AoA [Applicable for Private Limited Companies and OPCs]
• LLP Agreement [Applicable for LLPs]
• Company PAN & TAN

*Prices and documents can differ based on the company type.

Which company type to register your business with?

Before commencing the registration process for either a OPC or a Private Limited company, it is essential to carefully assess the following factors.

1. Consider the Nature and Size of Your Business

• Evaluate the nature and size of your business. If your operations are on a smaller scale and you are a single operator, opting for OPC registration may be advantageous. Conversely, for larger businesses with substantial employee numbers and capital needs, registering as a Private Limited Company offers greater flexibility in capital raising.

2. Fundraising Requirements

• Assess your fundraising requirements. If your objective is to raise funds through equity, opting for a company structure is essential. However, if you can fundraise through debt options, the OPC structure may work.

3. Compliance Requirements

• Generally, OPCs have fewer compliance requirements compared to Private Limited Companies, making them more suitable for small businesses. Nonetheless, ensure that you are aware of several post-incorporation compliances that come along with each business structure and choose accordingly.

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Explore side-by-side comparisons of popular company types with prices to help you give a clear picture of the nuances involved with different legal structures.

Conclusion

Choosing between a Private Limited Company and a One Person Company depends on your business needs.

If you’re a solo entrepreneur who clearly focuses on managing things independently and prefers minimal compliance requirements, an OPC can be a great option. It’s a straightforward structure, perfect for freelancers, consultants, or small-scale businesses who want the advantages of limited liability while keeping things simple.

However, if you’re building a business with big dreams, such as attracting investors, scaling operations, or entering international markets, a Private Limited Company might be a better fit.

When making this decision, it’s essential to consider not only where your business is today but also where you want it to be in the future. Think about:

• Your business goals: Are you aiming for steady income or scaling into new markets?
• Your growth plans: Will you need external funding or partners?
• Your resources and bandwidth: Can you manage the compliance requirements of a Private Limited Company, or is a simpler structure better suited for now?

Explore side-by-side comparisons of popular company types with prices to help you give a clear picture of the nuances involved with different legal structures.

Frequently Asked Questions