Saturday, March 30, 2013

Limited Liability Partnership - PLT

Limited Liability Partnership (LLP) Registration

A limited liability partnership (LLP) is a type of business structure where two or more partners incorporate a partnership entity that shields co-partners from liabilities due to the willful misconduct or gross negligence of one partner or a group of partners. For a LLP to exist, there must always be two or more partners. Although Malaysia’s Limited Liability Partnership Act of 2012 does not restrict the benefit of LLP structure to certain classes of professionals only, in practice, LLP structure makes the most sense for chartered professions only (such as lawyers, accountants, etc.) when two or more such professionals decide to work together. For a typical entrepreneur however, incorporating a private limited company is the preferred option.

LLP – Quick Facts

Liability

  • A LLP is rendered a separate legal identity (ie separate from its owners) in Malaysia. Thus a LLP can own property, sue or be sued.
  • A partner of the LLP cannot be held personally liable for the wrongful commission or omission of any other partners.
  • In the course of business of an LLP, if a partner becomes liable to any person or company through his acts of commission or omission, the LLP is liable to the same extent as the partner. Therefore claims can be made against an LLP to the full extent of its assets.
  • A partner during the course of the business is personally responsible for liabilities that arise due to his act of commission, omission, or negligence. Claims for liabilities can be made against him and his personal assets. However other innocent partners and their personal assets will remain insulated from such liabilities and their liabilities will be limited only to the capital contributed by them to the LLP.
  • The mutual rights and duties of the LLP and its partners are governed by the limited liability partnership agreement. In the absence of agreement as to any matter, the First Schedule of the Limited Liability Partnership Act 2012 shall apply.

Taxation

  • From a tax perspective, LLPs are not taxed at the entity level and profits are treated as part of each partners’ personal income and are taxed at personal income tax rates. Where the partner is an individual, his share of income from the LLP will be taxed based on his personal income tax rate. Where a partner is a company, its share of income from the LLP will be taxed on the tax rate for companies.

Members & Management

  • There must be a minimum of 2 partners. However there is no cap on the maximum number of partners in a LLP.
  • The partners can be natural persons or companies
  • A partner may cease to be a partner upon his death or dissolution or in accordance with the limited liability partnership agreement (if any) or, in the absence of such agreement, by giving 30 days’ notice to the other partners.
  • A proposed new partner requires the consent of all existing partners. Other matters are decided by majority vote, with each partner having one vote.
  • Unlike private limited companies, an LLP in Malaysia does not have directors, shareholder or secretary, instead the partners own and run the business.
  • Every limited liability partnership must appoint at least one manager who is a natural person of at least 18 years of age and who is ordinarily resident in Malaysia, a Malaysia Citizen, Permanent Resident, or Employment Pass holder.

Name & Address

  • A Malaysia's LLP’s name must include the words “Perkongsian Liabiliti Terhad.
  • Every limited liability partnership shall have a registered office within Malaysia to which all communications and notices may be addressed.

Compliance

  • LLP is required to keep its books up-to-date so as to substantiate all the transactions and financial position of the LLP, failure to do so may lead to prosecution and penalties.
  • An LLP in Malaysia is not required to file its accounts or have them audited. Nor does it need to disclose its capital.
  • The manager of an LLP must submit to the Registrar an annual declaration of solvency or insolvency; such declaration must be lodged within the first 15 months from the date of the registration of the LLP. Subsequently a declaration once in every calendar year must be submitted at intervals of not more than 15 months.
  • Every limited liability partnership must ensure that its invoices and official correspondence bear the statement that it is registered as an LLP, and the name and registration number of the limited liability partnership must be visibly printed on all its bills, invoices and official correspondence.
  • Any changes to the particulars of the LLP must be lodged with the Registrar within 14 days from the date of change.

LLP – Documents Required

In order to register an LLP in Malasia, the following information/documents are needed:
  • Proposed LLP name
  • Particulars of the LLP partners/managers as per the foreign passport or Malaysia identity card
  • Residential address of the LLP partners/managers
  • Declaration of compliance
  • Details of the registered address for the LLP
  • Consent to Act as Manager and Statement of Non Disqualification to Act as Manager
  • In case the partner is a company: Registration details of the company such as registration number, jurisdiction, registered address, etc.

LLP – Registration Procedure

A limited liability partnership is registered with  SSM of  Malaysia. Foreign individuals must appoint a professional services firm to handle the registration process. Even for locals, it is suggested to engage a professional services firm for LLP registration including drafting the partnership agreement.
The LLP registration process consists of two steps: a) name reservation; and b) registration of the entity. Under normal circumstances, an LLP registration can be completed in a single day.

LLP – Corporate Documents Issued

ROC will send an email notification confirming the Malaysia LLP registration. A business profile containing the registration details can be obtained from ROB upon successful registration of the LLP. Both of these documents are provided in a softcopy format via email which is sufficient to all purposes in Malaysia. If required, certified hard copies can always be requested from SSM office by filing an application accordingly.

LLP – Bank Account Opening

After registering the LLP, a bank account can be opened in any of the several international, foreign and local banks in Malaysia. LLP may open a multiple account of various currencies or can also open a single multi currency account. Typically, the banks will require the following documents:
  • Account Application Form(s)
  • Partners’ Resolution of bank account and authorized signatories
  • Certified True Copies of photocopies of NRIC/Passport of all Partners and Authorized Signatories
  • Partnership Agreement
  • A latest print out of the LLP’s business profile

LLP – Annual Filing Requirements

An LLP is required to keep an uptodate books of accounts so as to substantiate all the transactions and financial position of the LLP. Accounting and other financial records need to be maintained for 7 consecutive years.
The manager of an LLP must submit to the Registrar an annual declaration of solvency or insolvency; such declaration must be lodged within the first 15 months from the date of the registration of the LLP. Subsequently a declaration once in every calendar year must be submitted at intervals of not more than 15 months.

LLP Advantages

  1. Separate Legal Identity: An LLP has a separate legal identity and can own property, enter into contracts, sue or be sued in its own name.
  2. Limited personal liability: The partners of the LLP will not be held personally liable for any business debts incurred by the LLP or the wrongful acts of another partner. A partner may, however, be held personally liable for claims from losses resulting from his own wrongful act or omission.
  3. Perpetual succession: Any changes in the LLP (e.g. resignation or death of partners) do not affect its existence, rights or liabilities.
  4. Ease of compliance: Compliance requirements are more complex than sole proprietorship but simpler than a private limited company.

LLP Disadvantages

  1. Requires a minimum of 2 partners at all times.
  2. Individual partners can commit the partnership to formal business agreements without the consent of the other partners.
  3. LLPs lack the ease of ownership transfer and investment that a company structure provides.
  4. No corporate tax benefits: Tax  exemptions available to private limited companies are not available to LLPs. LLP is treated as tax transparent which means an LLP is not taxed as an entity. Instead each partner is taxed on their share of the profits as per the personal income tax rate.

7 comments:

  1. if my partner is my wife and she is a govt servant and if my company is making money do I need to pay her officially?
    is it necessary to pay her?
    If I must pay her then does she have to pay higher tax as she has to combine
    her private income with her govt. income?
    it it legal to add her as my partner as she is a govt servant?
    Thank You.

    ReplyDelete
  2. Legally no partner need to be paid unless it is in the agreement. Personally no one want to be your partner if she is not paid. Yes she has to pay higher income tax. She is your legal partner but she might contravenes government employee rules.

    ReplyDelete
  3. I came across that the LLP is tax at company tax rate and not personal tax rate.
    please confirm.

    ReplyDelete
    Replies
    1. Yup, not on personal tax rate.

      Income from LLP will be taxed at the LLP level.

      please refer to "10. Tax Treatment Of A Limited Liability Partnership":
      http://www.hasil.gov.my/pdf/pdfam/PR_3_2014.pdf

      Delete
  4. Akta Koperasi 1993 diluluskan Rang-Undang-Undang nya tahun 2005 dan LLP pada 2012 seakan shareholder dimana menampakkan seakan percanggahan antara kerajaan institusi kerajaan pusat dan institusi kerajaan negeri dan ini memangkinkan suatu perniagaan berakibat hasil luar cukai atau pegangan cukai dan ini adalah bahaya kerana jumlah itu boleh dipulih semula dengan cara penjenayahan dewan perdangan antarabangsa dimana melibatkan duta kecil dan negara kedua jika triple momentom benching tidak disertakan dalan Tribunal Rayuan Kastam dan ini membawa pembunuh yang disokong masuk sempadan lalu lepas.Tetapi mungkin untuk Sdn. Bhd. dan bukan untuk Enterprise social Komuniti atau CIMB Niaga Saving Account.

    ReplyDelete
  5. Dear Sir ,
    I would like to know ,
    what would be the minimum Authorized and paid up capital of a foreign LLP,
    Any foreign student could be a director of the foreign LLP ,
    Foreign LLP company can hire overseas skilled /Technical/Competent staff
    Can 2 or more directors be of different nationality in foreign LLP
    Regards
    Haaris

    ReplyDelete
  6. SSM did not advise me to print certificate on the spot. I have to go back to SSM Sentral just to request for a LLP Certificate and going there again 3 days later just to collect it. So not-friendly procedure....

    ReplyDelete