Closure of Partnership Firm

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Overview

Closing a Partnership Firm

A partnership firm in India is an entity that has sole purpose of having profit from the business. In a partnership firm, two or more than two parties collaborate with a legal agreement to establish a business. This legal agreement is known as partnership Deed. Once the partners achieve the purpose, they decide to wrap up the partnership firm. In such cases, the firm is dissolved, and the partnership comes to an end.

Once the partnership firm shuts, all its affairs can be wind up by selling the assets. It leads to the payment of the liabilities and discharging the claims of the partners. The closure of partnership among all the partners of a firm is known as the closure of the partnership firm. This is usually initiated by signing a dissolution agreement between the partners.

Modes of closing a partnership firm in India

Closure with the intervention of the court

When the closure of the company is initiated by one of the partners by suing any other partner, then the court involves itself. But a court in India can only conclude a partnership firm if the partnership is listed with the registrar of firms. Thus, any unregistered partnership entity cannot be dissolved by the court.

In such cases, the court may intervene and help in closing the company when one of the partners becomes incapable of carrying out his responsibility. On the other hand, if a company's partner is guilty of misconduct that may harm the business, or in case of a repeated breach in partnership, the court can intervene and help in closing the partnership.

Closure without the intervention of the court

Mostly all the partnership firm closes through the closure agreement between the partners. In this mode, all the partners of a company come forward and sins an agreement that indicated the closure of the company. Such a closure involves the mutual settlement of all the pending liabilities. The partners also settle all the accounts among them. Thus, in this mode, there is no third party intervention. The closure without third party interference may happen due to numerous reasons such as:

1) Insolvency among the partners

2) Unlawful business practiced by one of the partners in the name of partnership firm

3) In case of the term of the partnership expires

4) Death of one of the partners

5) Resignation of the partner

It can also be done when one of the partners sends notice in writing to another for dissolution

Document Required

PAN card

To wrap up a one-person company, the owner must provide the following incorporation certificates such as:

It is a mandatory document required for filing the closure of the partnership firm. All the partners must submit their PAN card details along with the Pan number of the firm. It acts as an identity proof.

Address proof of partnership firm:

If the registered office of the partnership firm is rented, the entity must submit its rent agreement as a proof of address. You can also provide the following details as proof of address such as:

Electricity bill
Water bill
Property tax bill
Gas receipt

NOC from the landlord

The partnership firms also must provide the No objection certificate if the place of business is a rental property.

Information of the Account

The partnership firm that wants to wrap up needs to submit the financial statements of the firm.

Legal liabilities

If the partnership is having any pending litigations, then it must provide a statement about the pending litigations.

List of secured creditors

It includes the names of all the creditors that are secured. The partnership firm must provide the list of secured creditors for closing the partnership firm.

Original Partnership Deed and all its modified versions, if any

Any partnership firm that wants to close must hand over the original partnership Deed to the ministry of corporate affairs. If the original deeds have been modified, the firm also has to provide the modified version of the partnership Deed.

Time Lines

(10 to 15 Days)
Purchase the Service
Upload / send the Documents
Discussion with expert
Filing of application with registrar authorities
Receipt of Certificate
Confirmation to client

Service Covered

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2450*

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3450*

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One Year ITR of Firm

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4950*

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One Year ITR of Firm
One Year ITR of Partner upto 2

Notes:
* This price is inclusive of all Govt filing fee and excluding GST amount.

FAQ's

How can we differentiate between the dissolution date and the wrap-up date?

When any partnership firm comes to an end of existence, the date is known as the dissolution date. After the closure, the partners will have no more business relationship. They will complete all the unfinished jobs and settle all the un-cleared liabilities. Then it leads to settlement of all the assets and wraps up the partnership. But the Wrap-up date is the date when the wrapping up of the partnership completes.

What does the closure agreement of a partnership firm include?

The closure agreement of partnership firm includes the following:

1) The date on which the partnership firm will stop trading and the process of wrapping up

2) The things that the partners cannot do from the date of closure to the final wrap up

3) The returns of papers, and the fulfillment of the assets along with the termination of agreements

4) Discharge of partnership liabilities

5) The approval of the final set of account of the partnership firm

6) The distribution of the partnership funds

7) Retention of records

8) Notification about dissolution

How are the accounts in the partnership firm settled for wrapping up?

First, all the losses of the partnership firm will be paid. It includes settlement of assets and capital contribution to set off the losses. In the next step, all the third party loans are paid. After that of any loan amount taken from any other partner of firm is settled. Then the balance amount would be shared.

What are the conditions for which a partnership needs to be closed?

The partnership firm can be closed under the following conditions:

1) If the partnership firm were for a fixed term, the expiry of the term would lead to closure of the partnership firm

2) If the partnership firm were to accomplish a particular objective, after the fulfillment of the objective, the partnership firm would wrap up.

3) In case of death of anyone, partner also will lead to end of the partnership firm.

What are the rights of each partner after the closure of the firm?

Every partner holds equivalent powers to the contract.

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