One of the earliest decisions that any new business needs to make is to decide on its corporate structure in order to trade.
History of LLP in Malaysia
The advancement of business and trade in South East Asia warrants the growth of new forms of business entities that can be considered necessary, due to the demands and needs of investors and traders.
In order to obtain an ideal resolution in the highly competitive business climate that takes into account both domestic and global interests, several nations' governments have passed legislation to expand their preexisting laws in order to accommodate new types of business enterprises.
As a result of this, Limited Liability Partnerships ("LLPs") were introduced as a form of corporate vehicle relatively, introduced in 2012 by the Limited Liability Partnerships Act 2012 [Act 743], and are especially suited to professional services companies, such as Lawyers, Chartered Accountants and Company Secretaries.
Structure of an LLP
Malaysia is the second country in South East Asia to legislate on LLPs, in 2012, after Singapore.
However despite its name, a LLP is not a type of partnership and partnership law does not generally apply to LLPs.
They are a type of hybrid corporate vehicle between a limited liability company and a traditional partnership. This is because they offer the limited liability available to a company’s shareholders combined with a tax regime and the flexibility available to partnerships.
Salient Features of a LLP
The LLP is a body corporate and has the legal personality separate from the partners (separate legal entity).
LLP is a perpetual succession.
LLP has unlimited capability and is capable of suing and be sued for it, acquire, owning, holding and develop or dispose of property.
LLP may do and suffer such other acts and things as bodies corporate may lawfully do and suffer.
Other Specific features of a LLP
it must be incorporated by being registered with the Companies Commission of Malaysia (Suruhanjaya Syarika tMalaysia "SSM"), however unlike a company, it does not have shareholders, shares or directors, but has partners;
it has no articles of association or constitution. partners will often however enter into a LLP Agreement similar in nature to a partnership agreement, this is a private document (and so does not need to be publicly filed). Partners of a LLP are not required to have a LLP agreement” in place between them, however if they do not, certain default provisions will apply. These include:
all the partners are entitled to share equally in the capital and profits of the limited liability partnership,
no partner shall be entitled to remuneration for acting in the business or management of the limited liability partnership
no majority of the partners can expel any partner unless a power to do so has been conferred by express agreement between the partners
no person may be introduced as a partner without the consent of all existing partners, etc.
it is tax transparent like an ordinary partnership. The individual partners are treated as self-employed for tax purposes and taxed on the partners' salaries derive from the LLP in accordance with the partnership agreement; and
Who can register a Limited Liability Partnership
Professionals
Small and medium business.
Joint Venture.
Venture Capital (Venture Capital)
LLPs are increasingly being used as a business vehicle, particularly for businesses which involve a number of managers/owners. The LLP model has been particularly enthusiastically embraced by accountancy and law firms.
Setting up a Limited Liability Partnership
If you’re thinking of setting up an LLP, here are a few factors to consider:
By minimum two (2) persons (in whole or in part, an individual or a body corporate), However, there is no restriction on the maximum number of partners;
For any lawful business for the purpose of making a profit; and
Formulating an LLP agreement.
Registration of LLP
You need to choose a business name that is unique and not similar to any other business. A registered address will need to be included on the incorporation document, as well as:
Nature of business
Name and details of partner
Name and details of compliance officer
Letter of approval from professional body (if any)
The name, nationality and the usual place of residence of every person who is to be a compliance officer of the limited liability partnership
Compliance Officer
A limited liability partnership shall appoint at least one compliance officer from amongst its partners or persons qualified to act as secretaries under the companies Act 2016 who-
is a citizen or permanent resident of Malaysia; and
ordinarily resides in Malaysia
Where no compliance officer is appointed then all partners shall be deemed as the compliance officer of the limited liability partnership.
Duties of the Compliance Officer
The duties of the compliance officer include submitting an annual declaration to the Registrar, keeping and maintaining the LLP's registers and records, advising the partners to ensure compliance with LLP law, and reporting any changes that occur in the registration particulars of the LLP.
Advantages of forming a Limited Liability Partnership
If you’re thinking of setting up a limited liability partnership, the structure offers a number of advantages, including:
Protection of personal assets via limited liability
Flexibility in terms of management and how profits are shared
Partners can be companies as well as individuals
Different levels of partnership – you can choose the level of your involvement in the business
The LLP can enter into contracts in its own name
Tax benefits may be available
Are there any potential pitfalls associated with setting up a LLP?
The public can view accounts and a financial position report of the LLP at any time.
Setting up a limited liability partnership (LLP) can be more expensive than a "traditional" partnership.
Because there are additional reporting and accounting requirements, the administrative costs are typically higher than they would be for a "traditional" partnership.
Registration Fee
Fee for registration of LLP is RM500.00
Upon registration, only notice of registration will be issued.
Certificate of registration of LLP will be issued by SSM upon request together with the prescribed fee.
Annual Declaration
An LLP shall ensure to lodge with the Registrar on an annual basis within ninety days from the end of the financial year of the LLP, a declaration made by any two of its partners that the LLP is able or not able to pay its debts as they become due in the normal course of business and the declaration shall be accompanied by such other particulars as may be required by the Registrar.
In the case of the first annual declaration, it shall be lodged not later than eighteen months from the date of the registration of the LLP.
Income Tax
The Limited Liability Partnership
A limited liability partnership (LLP) is not required to have its financial statements audited by an independent auditor. Still, it is expected to keep accurate and sufficient accounting records and other records that reveal the actual financial status of the business.
Even though it is structured as a partnership, a Limited Liability Partnership (LLP) is taxed in the same manner as a company, which is normally at a rate of 24%. If an LLP has a capital contribution that is less than RM2.5 million, then it will be eligible for a preferential tax rate of 17% on the first RM600,000 of its chargeable income.
However, limited liability partnerships (LLPs) do not take advantage of as many tax incentives as companies, such as the reinvestment allowance.
The Partners
Taxation of partners in a limited liability partnership (LLP) is analogous to that of shareholders in a public company or private limited company (Sdn Bhd) because neither group is subject to income taxation on the profits distribution or dividends that they received.
However, LLP partners' remuneration, including salary and bonuses, is subject to taxation similar to that of an employee. To obtain a tax deduction, the remuneration paid to the partners should be documented in the LLP Agreement .
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Summary
A limited liability partnership (LLP) is a type of business structure that is recognized in Malaysia under the Limited Liability Partnerships Act 2012. It is a legal entity that combines the flexibility of a partnership with the limited liability of a company.
In an LLP, partners have limited liability for the debts and obligations of the business. This means that the personal assets of the partners are protected from business liabilities. However, each partner is responsible for their own actions, and they may be held liable for their own misconduct or negligence.
An LLP in Malaysia must have at least two partners, who can be individuals or companies. The partners are required to register the LLP with the Companies Commission of Malaysia (SSM) and file annual returns and financial statements. An LLP must also have at least one designated partner who is responsible for the management of the business and compliance with legal requirements.
LLPs are often used by professionals, such as lawyers, accountants, and architects, who want to work together in a partnership but also want to limit their personal liability. They can also be used by small and medium-sized businesses that want the flexibility of a partnership structure but need the protection of limited liability.
有限责任合伙公司（LLP）是一种商业结构，在2012年的《有限责任合伙公司法案》下获得马来西亚法律认可。它是一种将合伙企业的灵活性与公司的有限责任相结合的法律实体。
在LLP中，合伙人对企业的债务和义务承担有限的责任。这意味着合伙人的个人资产受到企业责任的保护。然而，每个合伙人对自己的行为负责，并且可能因自己的不当行为或疏忽而承担责任。
马来西亚的LLP必须至少有两个合伙人，可以是个人或公司。合伙人需要向马来西亚公司委员会（SSM）注册LLP，并提交年度报告和财务报表。LLP还必须至少有一名指定合伙人负责企业的管理和合规性要求。
LLP通常被律师、会计师和建筑师等专业人士使用，他们想要在合伙企业中共同工作，但也希望限制自己的个人责任。它们也可以被中小型企业使用，这些企业需要合伙企业结构的灵活性，但需要有限责任的保护。
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