One needs to earn big to sustain better standards of living. In India, the culture follows to establish a business firm or to carry the family business legacy. One of them may be Limited Liability Partnership where the existing partners have limited liability and the no other partner is responsible for a partner’s account misconduct or negligence. When the liability seems to be exceeding the partners tend to dissolve the firm to avoid future loss of capital.
The dissolving of a Limited Liability Partnership involves the process of realization of assets and payments of all liabilities and distributing the surplus amount, if any, to the parties signed against the Limited Liability Partnership. In the process of winding up or dissolution, the partners need to have the mutual of atleast ¾ of the total number of partners associated with the firm to seek into the solution. The dissolution of a firm takes place when falling under following circumstances –
• When the partners want a dissolution of the firm
• When the firm is not able to pay its debts and liabilities
• It can also happen in case if the firm has violated the ethics of Limited Liability Partnership
• When either of the partners don’t show up for the business
In order to dissolve a Limited Liability Partnership, one need to liquidate all its assets accompanies with the firm whether it is a financial asset or tangible assets. This is done in order to pay off all the liabilities and debtors of the company. And the surplus, if any, left with the firm is distributed in equal proportions to all the partners of the firm the partners need to follow a legal procedure to get their firm dissolve. According to Section 63 of the Limited Liability Partnership Act, a limited liability partnership may be winded up in the following ways –
• Voluntarily – this may be applied when the dissolution or the winding up of the company takes place due to the mutual consent of the partners. This is simple and most effective, as there is no problem in liquidating the assets. There is a clear statement regarding the payment of liabilities and distribution of surplus among the partners as per their will.
• Tribunal – whereas in this case, the firm liquidates all its tangible and intangible assets required making payments to the debtors and creditors. The partners violating the sovereignty and dignity of the Limited Liability Partnership may be asked to wind up the firm involving a complete legal process. If the firm fails to accomplish the filing with the Registrar for any of the consecutive five years may be asked to insolvent the firm.