Principally, a Limited Liability Partnership (LLP) is set up by two or more individuals (called its members) to embark on a profit-generating venture together. An LLP is a business structure that integrates the features of a traditional partnership and a corporation. Accordingly, this blog details all the qualifying conditions and requirements you must fulfil if you want to understand how to dissolve an LLP in the UK.
Moreover, an LLP provides its members with limited liability protection, meaning that any financial liability incurred by the company does not impact their personal assets. More specifically, the members’ liability doesn’t surpass the financial input made by each member individually.
Although an LLP is created with the main intention of profit-making, certain circumstances might arise which mandate its dissolution. Notably, dissolving an LLP is no breeze since it involves several conditions that must be met step-by-step to ensure its proper closure and compliance with Companies House.
Furthermore, if you reckon that your LLP is unlikely to suffer from financial distress and plan to create it, read our guide, What is a Limited Liability Partnership (LLP)?
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What are the reasons for the dissolution of an LLP?
There can be multiple reasons for striking off and dissolving your LLP, such as:
When one or more members no longer want to be a part of the LLP and wish to depart or retire. However, following their departure, there is no one suitable for their replacement. Resultantly, the LLP can’t operate in such a scenario and has decided to close.
Members decision to choose another business entity:
Similarly, it is also possible for the members to call it quits and part their ways for pursuing other professional avenues. For instance, they might want to opt for a different business structure to run and manage their business, such as a general partnership or a limited company.
The membership falls below the legal threshold of two individuals:
An LLP means that there must be at least two partners to run it. Now, consider a scenario where the number of members has dropped below the minimum legal threshold of two individuals.
Now, when it persists for more than six months, the surviving or remaining LLP member becomes personally liable for the partnership’s debts. Consequently, LLP must dissolve in this situation.
The LLP is constantly facing an uphill battle to make profits:
When the economic activities, trade, or business of an LLP are constantly spiraling in a downward trajectory, it is no longer feasible to run it. Hence, this dire case necessitates that you learn how to dissolve an LLP.
It is utterly significant to emphasise here that you cannot apply to strike off or dissolve your LLP if it becomes insolvent since the creditors can still apply to Companies House to have it restored in order to secure outstanding debts even after the LLP’s dissolution.
How to dissolve an LLP: A comprehensive guide
Following are the crucial steps needed in knowing how to dissolve an LLP in the UK:
Apply to Companies House for voluntary strike off after establishing eligibility:
The first and foremost step involved in learning how to dissolve an LLP is to determine if it’s eligible for filing an application for the strike off. For this, the LLP must be solvent and have not participated in the following activities in the last three months:
No business activity conducted:
It is essential that the LLP has not conducted any kind of trade of business activity in the last three months, nor should it engage in any other activity apart from:
- When it pursues professional consultation to apply for dissolution or pays the application filing cost.
- When it winds down the partnership affairs.
- When it meets any statutory requirements, such as filing a tax return, confirmation statement, or accounts statements.
No name changed:
The LLP must not have altered or changed its name.
No business assets sold:
Any business assets like property, stock, or rights that the LLP previously sold while doing business must not be sold during those three months.
No insolvency proceedings:
It is worth mentioning here that you cannot apply for voluntary strike-off and dissolution if the LLP is facing insolvency proceedings, such as liquidation or compromise with its creditors or members.
Notify everyone connected with the dissolution process:
Even before applying for a strike off, a substantial step in understanding how to dissolve an LLP is keeping all the affected members in sync. More specifically, you are duty-bound to notify all parties who are likely to be affected by the LLP’s dissolution, including:
- Every LLP member;
- The employees hired;
- Current and prospective creditors (like lenders, banks, suppliers);
- All relevant HMRC departments/offices, such as Self Assessment, VAT, PAYE, Department for Work and Pensions (DWP);
- Any other organisation or party having a stake in the partnership’s affairs.
Submit the strike-off application to Companies House:
After notifying all the pertinent parties, a striking-off application form from Companies House must be completed and submitted to Companies House alongside the fee.
Besides, it is necessary to send copies of the striking-off form to all the above-cited parties within seven days of its submission to Companies House.
Ultimately, these detailed measures are intended to protect the interests of all parties having a stake in the LLP and may object to its dissolution.
Close the LLP’s business bank account:
It is also necessary to terminate the LLP’s business account before applying for its dissolution. Furthermore, after closing the account, the business assets are distributed among the members based on the percentage share for each member outlined in the partnership agreement.
In addition, the LLP’s business bank account will stand frozen on its dissolution date, and the Crown will receive any remaining assets and credit balance left in the account.
How to apply for LLP dissolution:
After meeting the eligibility criteria and informing all affected parties, you can simply apply to Companies House for its dissolution.
To know how to dissolve an LLP with Companies House, you must complete Companies House form LL DS01. Further elaborating, Form LL DS01 is a striking-off application that an LLP submits. It contains the following information:
LLP’s registration number, full name, names, signatures, and signing dates of each member filing the application.
More importantly, the form must be signed by a majority of members. Similarly, if it has only two members, both must sign it. Nevertheless, if only one member remains after the departure of other members, only their signature is required.
Finally, you can fill out and submit this form online or send it via post after downloading it.
How Companies House dissolves the LLP?
When Companies House gets the application, it will review it and, if accepted, publish it in the public register. Besides, you will also receive a copy of the approved application at your LLP’s registered office address.
Next, Companies House will issue a notice of the proposed striking off in The Gazette. The main purpose of issuing the notice is to allow interested parties to object. For greater clarity, the Gazette is the UK’s official public record and notice board, which includes information about companies registered with Companies House.
Lastly, if no one raises any objection within three months of receiving the notice, Companies House will strike off and dissolve the limited liability partnership. Consequently, the LLP will cease to exist.
Summary:
As stated above, the prime purpose of choosing an LLP business structure is to reap the profit-making benefits. However, under the sway of certain circumstances, its dissolution becomes indispensable.
Accordingly, When you pursue professional consultation from Accountingfirms to apply for dissolution, the accountants listed on our platform ensure that the LLP stands eligible in all respects to apply for the striking-off. Therefore, to ascertain that your LLP complies with all the applicable laws before it dissolves, contact Accountingfirms today.
Disclaimer: The information provided on AccountingFirms.co.uk is for informational purposes only and should not be considered as financial advice. Always consult with a professional accountant to ensure compliance with UK laws and regulations.