A Complete Guide to Business Lifecycle: LLP & Company Closure, NBFC Registration, Valuation, and GST Compliance in India from Vivek Ranjan's blog

Starting, managing, and closing a business in India involves several regulatory steps, and knowing the process for each is critical for a smooth journey. This article combines the essential aspects of LLP and company closures, the procedure for NBFC registration, the role of company valuation, and how GST registration and cancellation play a part, particularly in an LLP structure. Here’s everything you need to know to direct these stages effectively.

Closing an LLP in India involves a formal process to avoid penalties and remain compliant. There are primarily two methods for LLP closure:

• Strike-Off through Form 24: The simplest method for LLPs that haven’t started business or have stopped operations for a year or more. This involves filing Form 24 with the Registrar of Companies (RoC) and submitting a recent financial statement (showing zero assets/liabilities) and partner consent. Once reviewed, the LLP is officially struck off.
• Voluntary Liquidation: If the LLP has existing assets or liabilities, voluntary liquidation is necessary. This involves appointing a liquidator who handles debt settlement and asset distribution among partners. The liquidator’s report, after completing these steps, is filed with the RoC to conclude the dissolution.

Closure of private limited company requires more formalities than an LLP. Here are the main methods:

• Strike-Off: Companies with no assets, liabilities, or business activity may apply for strike-off via Form STK-2 on the MCA portal. Attach resolutions from the board and shareholders, an up-to-date financial statement, and other relevant documents.
• Voluntary Liquidation: For active companies, voluntary liquidation involves appointing a liquidator, selling assets, settling liabilities, and distributing remaining funds to shareholders. This process, often supervised by the National Company Law Tribunal (NCLT), concludes once all financial obligations are met, and the final accounts are filed.
• Insolvency and Bankruptcy Code (IBC): If a company is insolvent, creditors or stakeholders can initiate closure under the IBC through the NCLT. This structured approach ensures debts are paid off as fairly as possible.

By following the required steps, company closure becomes efficient and legally compliant, helping protect the reputation and interests of all involved.

Non-Banking Financial Companies (NBFCs) offer various financial services without having full banking licenses. Here’s an outline of the registration process:

• Step 1: Company Incorporation: Begin by incorporating your entity as a private limited or public limited company under the Companies Act, 2013.
• Step 2: Meet Minimum Capital Requirement: An NBFC must have a minimum net owned fund (NOF) of ₹2 crores to meet RBI guidelines.
• Step 3: Application to RBI: Submit your application through the COSMOS portal, along with documents like business plans, projected financials, and management details.
• Step 4: RBI Review and Approval: The RBI assesses the application, reviewing the applicant’s financial soundness and adherence to regulatory requirements. Once approved, a Certificate of Registration (CoR) is issued.

NBFC registration is critical for businesses wanting to provide lending or investment services legally, under RBI supervision. Proper setup helps streamline operations and maintain regulatory compliance.

Company valuation is important for decisions involving investments, mergers, acquisitions, and business growth. Here’s an overview of common valuation methods:

• Asset-Based Valuation: This method calculates the net asset value by subtracting liabilities from total assets, ideal for businesses with substantial physical or intangible assets.
• Income-Based Valuation: Using projected cash flows, this method calculates present value based on expected returns, suitable for businesses with predictable revenue streams.
• Market-Based Valuation: Comparing similar companies in the market, this approach provides a realistic view of a company’s worth based on revenue and industry standards.

Selecting the right valuation method depends on the business type, financial performance, and the valuation's purpose. Engaging valuation professionals ensures accuracy, helping attract investors or guiding strategic decisions.

The Goods and Services Tax (GST) is an essential tax compliance requirement in India. For businesses involved in the sale of goods or services, GST registration is mandatory when the turnover threshold is met. Here’s how it relates to an LLP and a company:

• GST Registration for LLPs: LLPs must register for GST if their annual turnover exceeds ₹40 lakhs (or ₹20 lakhs for service providers). Interstate supply and specific types of business also mandate GST registration regardless of turnover. Registering for GST allows LLPs to claim input tax credit, making tax management easier.
• Process for GST Registration: Apply on the GST portal with the necessary documents, including PAN, address proof, and bank details. A unique GST Identification Number (GSTIN) is issued upon approval, which must be used for tax invoices, filings, and payments.
• GST’s Role in NBFC Registration: If the NBFC deals with taxable goods or services, GST registration is also essential to remain compliant.

Cancellation of GST registration can be necessary in situations like business closure, a turnover drop below the GST threshold, or a change in the business structure. Here’s how to proceed:

• Eligibility: If the LLP or company discontinues operations or reorganizes, you can apply for GST cancellation. Turnover-based cancellations require evidence that your revenue has consistently fallen below the threshold.
• Applying for Cancellation: Login to the GST portal, fill the cancellation application, and provide reasons with supporting documents. The GST officer reviews the request, and upon approval, issues a cancellation order.
• Filing Final GST Return: A final return, Form GSTR-10, must be filed within three months to settle outstanding liabilities, clearing the business’s tax obligations.

By managing GST registration and cancellation correctly, businesses can avoid unnecessary tax burdens and remain compliant, simplifying financial and operational transitions.

Understanding the lifecycle of a business, from registration to valuation and eventual closure, is essential for directing India’s regulatory scene. Whether setting up an LLP, closing a company, registering an NBFC, or managing GST compliance, each step has its own requirements. Properly closing anLLP or company protects partners and shareholders from future liabilities, while NBFC registration opens the door for financial service offerings under RBI guidelines. Company valuation provides insights for growth or strategic changes, while GST registration ensures tax compliance, with cancellation available when operations cease.

Incorporating best practices and timely compliance checks into your business journey can make these processes more manageable, allowing you to focus on growth and successful business operations. For complex procedures, consulting legal and financial experts can provide added confidence in meeting every requirement accurately and efficiently.