In Malaysia, there are many different kinds of business entities, but one of the most common and widespread ones is called a partnership.
The Companies Commission of Malaysia (Suruhanjaya Syarikat Malaysia "SSM") and the Registration of Businesses Act 1956 are responsible for regulating partnerships.
A partnership is a business entity owned by two (2) persons but not exceed to twenty (20) persons (Except for partnerships for professional practice with no maximum limit) at one time.
Whether a businessman should use a partnership to carry out their business depends on the specific circumstances and goals of the business. Here are some points to consider when deciding whether to use a partnership:
Shared responsibility and liability: In a partnership, each partner shares responsibility for the business, and each partner is also personally liable for the debts and obligations of the partnership. This means that if one partner cannot meet their obligations, the other partner(s) may be responsible for covering the shortfall.
Flexibility: Partnerships are flexible and easy to set up. They offer a wide range of options for structuring the partnership agreement, which can be tailored to the specific needs of the business and the partners.
Shared decision-making: Partnerships require shared decision-making, which can be beneficial if the partners have complementary skills and can work together effectively. However, it can also lead to disagreements and conflicts if the partners have different ideas about running the business.
Tax implications: Partnerships are "pass-through" entities, meaning that the business itself does not pay taxes on its profits. Instead, the profits are distributed to the partners, who report them on their personal tax returns. This can be advantageous from a tax perspective, but it also means that the partners are personally responsible for paying taxes on their share of the profits.
Ultimately, whether a partnership is a right choice for a particular business depends on various factors, including the business's nature, the partners' goals, and the legal and regulatory requirements in the relevant jurisdiction. It is always a good idea to consult a business advisory or accountant to get advice on the best structure for your business.
Requirement
To be able to register a Partnership to manage their business in Malaysia,
partners must be a Malaysian Citizen or Permanent Resident (PR) f Malaysia.
partners must be aged 18 years and above.
Only partners is allowed to submit an application.
When registering a partnership, partners are not permitted to use a name that appears on their identification card as the name of the partnership.
Annual Fee for a Partnership in Malaysia
Trade Name: RM60
Branch (s): RM5
Business Information Print-out: RM10.60
What is the responsibility of the Partners?
Register the business within 30 days from the commencement date of the business by submitting Business Registration Form (Form A).
Renew your business registration within 30 days before the expiration date of the registration or previous renewal by submitting an Application for Renewal of Business Registration (Form A1).
A new business registration may valid for a period of 1 year and does not exceed 5 years on each registration.
Register business changes within 30 days from the date of change of main address, nature of business, branch address and owner information by submitting a Registration of Changes (Form B).
Notification of termination of business
within 30 days from the date of termination of business operation or
due to death within 4 months of death by submitting a Notification of Termination of Registered Business (Form C).
Displaying Business Registration Certificate in a conspicuous place at the main business premises or branch.
Put a signboard displaying business name outside the business premises, and if there is more than one place of business, outside of each place of business
Display business name and registration certificate number on letterhead, invoice, bill and other business documents.
Obtain the appropriate license, permit, or letter of authorisation from the relevant authorities of the type of business requiring prior approval even if the business has been registered with SSM.
3 Reasons Why You Should Form a Partnership
Sharing of responsibility
Minimum entry requirements
Easy to end/close
But why do people say starting a Partnership in Malaysia might not be a Good Idea?
A Partnership is not a separate legal entity
This means that each partner is responsible for his or her own share of the business's debts and liabilities. If one of the partners has gone bankrupt, creditors can sue the other partners to get back the debt.
In simple words, the legal status of a partnership can be defined as follows:
It is not a separate legal entity from the business owners
The partners are personally liable for all the debts and losses of the partnership
It can sue or be sued in the partners' names
This will have a direct effect on the fortune of each partner.
When there is an Internal Dispute
In the event of a disagreement among partners, the partners cannot unilaterally remove one another from the partnership unless they have expressly agreed to do so in a written Partnership Agreement. This may cause problems in the relationships between partners and in business decisions.
That is correct, of course. When people first decide to go into a Partnership together, they are excited and eager to start a brand new chapter of their lives together in the world of commerce. In the beginning, they are in complete agreement with one another. These up-and-coming business people are under the impression that they will remain partners in their enterprise either indefinitely or up to the point where they can sell it for an unimaginable sum of money.
They have the mindset that nothing negative can or will occur. They have such a high level of confidence in one another that they have never bothered to formalise their partnership in writing.
In this particular situation, what could possibly go wrong? The answer, in a nutshell, is a LOT!
What is a Partnership Agreement?
An agreement between the parties in a partnership that is put in writing is called a partnership agreement.
To safeguard the owner's investment in the partnership, dictating how the company will be handled, clearly describing the rights and obligations of the partners, and setting the rules of engagement in the event that a disagreement arises among the parties are all goals of a partnership agreement.
The potential for misunderstandings and disagreements among the owners can be mitigated by having a partnership agreement that is well-written.
In the absence of a Partnership Agreement
According to the Partnership Act 1961, in the absence of a partnership agreement:
All partners contribute equal capital
Profits or losses will be shared equally
Partners are not entitled salaries
Partners are not entitled, before the ascertainment of profits, to interest on the capital subscribed by him
No change may be made in the nature of the partnership business without the consent of all existing partners
No majority of the partners can expel any partner
Partners are entitled to 8% interest on a loan they make to the partnership
Registration of a Partnership in Malaysia
Both the Companies Commission of Malaysia (also known as Suruhanjaya Syarikat Malaysia ("SSM") - https://www.ssm.com.my/) and the Registration of Businesses Act 1956 are responsible for the regulation and registration of sole proprietorships in Malaysia.
To register a Partnership, you need to do is to complete the business registration Form (Form A) with the following information:
Business name
Commencement date of business
Principal place of business
The address of the branch of business (if any)
Information of partners
Type of business carried out
Provide a copy of the Partnership Agreement (if any)
Cessation of a Partnership
Any of the following can lead to the cessation of a partnership in Malaysia:
Bankruptcy
Cessation of business
Death of owner
Pursuant to court order
Reporting Partnership Income
A partnership must file a tax return to report its income, expenses, profits, losses, etc., but it does not have to pay income tax. Instead, it "passes through" its profits or losses to its partners.
On their own tax returns, each partner must report their share of the partnership's income or loss.
Partners aren't employees, so Form EA shouldn't be given to them. In fact, Form CP 30 must be given to the partner by the partnership.
Public Ruling No. 7/2021: Partnerships Taxation Part I – Determination of the Existence of a Partnership
The Inland Revenue Board of Malaysia ("IRB") published PR No. 7/2021: Partnerships Taxation Part I – Determination of the Existence of a Partnership, dated 29 December 2021, to provide an explanation on the determination of the existence of a partnership for income tax purposes.
This new 15-page PR comprises the following paragraphs and sets out seven examples:
1.0 Objective
2.0 Relevant provisions of the law
3.0 Interpretation
4.0 Introduction to a partnership
5.0 Characteristics of a partnership
6.0 Existence of a partnership
7.0 Types of partners
8.0 Partnership accounts
9.0 Filing of Income Tax Return Form (ITRF)
10.0 Disclaimer
Please note that this PR should be read along with PR No. 8/2021: Partnerships Taxation Part II – Computation and Allocation of Income.
Accounting and Auditing Requirement
It is not necessary for a partnership to engage an auditor to audit their accounting records.
The accounting for a partnership is essentially the same as is used for a sole proprietorship, except that there are more owners. In essence, a separate account tracks each partner's investment, distributions, and share of profits and losses.
Get in touch with us immediately for a free consultation with no fees to discover more.
Guidelines for Registration of a Business:
商人是否应该使用合伙企业来开展业务，取决于企业的具体情况和目标。以下是决定是否使用合伙企业时需要考虑的几点:-
分担责任和义务 - 在合伙企业中，每个合伙人分担企业的责任，每个合伙人也要为合伙企业的债务和义务承担个人责任。这意味着，如果一个合伙人无法履行其义务，其他合伙人可能要负责弥补。
灵活性 - 合伙企业很灵活，易于建立。它们为合伙协议的结构提供了广泛的选择，可以根据企业和合伙人的具体需要进行调整。
共同的决策 - 伙伴关系需要共同决策，如果伙伴们有互补的技能并能有效合作，这可能是有益的。然而，如果合伙人对如何经营企业有不同的想法，它也可能导致分歧和冲突。
税收影响 - 合伙企业是 "转手 "实体，意味着企业本身不为其利润纳税。相反，利润被分配给合伙人，由他们在个人报税中报告。从税收的角度来看，这可能是有利的，但这也意味着合伙人要亲自负责为他们的利润份额缴税。
最终，合伙企业是否是某一特定企业的正确选择，取决于一系列因素，包括企业的性质、合伙人的目标，以及相关司法管辖区的法律和监管要求。向商业顾问或会计师咨询，以获得关于你的企业的最佳结构的建议，这始终是一个好主意。
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