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
- 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.
- 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.
- Perpetual succession: Any changes in the LLP (e.g. resignation or
death of partners) do not affect its existence, rights or liabilities.
- Ease of compliance: Compliance requirements are more complex than
sole proprietorship but simpler than a private limited company.
LLP Disadvantages
- Requires a minimum of 2 partners at all times.
- Individual partners can commit the partnership to formal business agreements without the consent of the other partners.
- LLPs lack the ease of ownership transfer and investment that a company structure provides.
- 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.