Limited Liability Partnership (LLP) in Malaysia: A Complete Guide

Limited Liability Partnership (LLP) in Malaysia is a unique business structure, offering an amalgamation of features from a Private Company and a conventional partnership firm. This concept is particularly advantageous for startups, small and medium enterprises (SMEs), as well as professionals like lawyers and accountants. 

In this blog article, we'll delve into the intricacies of LLPs in Malaysia, providing you with comprehensive knowledge about their characteristics, benefits, drawbacks, and the registration process.

Key Takeaways:

• LLPs are regulated under the Limited Liability Partnerships Act 2012 and function as a separate legal entity.
• They offer limited liability protection to partners, safeguarding personal assets from business debts.
• No restriction exists on the number of partners, and the entity enjoys perpetual succession.
• LLPs face fewer compliance requirements and no audit obligation for small LLPs, reducing administrative burden.
• Taxation is applied at the entity level, simplifying tax reporting compared to corporations.
• Registration is done through the MyLLP portal with a MYR 500 fee, requiring a compliance officer who is a Malaysian citizen or PR.

What is Limited Liability Partnership (LLP) in Malaysia?

A Limited Liability Partnership or LLP in Malaysia is an alternative business vehicle that is regulated under the Limited Liability Partnerships Act 2012. It combines the characteristics of a Company and a Conventional Partnership firm, offering limited liability status to its partners. 

This structure is suitable for various lawful business purposes with a profit motive and is also ideal for professionals carrying out their practice.

Key Features of LLPs

Limited Liability Partnerships (LLPs) in Malaysia offers a blend of features. Here are the expanded key features:

• Separate legal entity: LLPs are legally distinct from their partners. This means that an LLP can own property, enter into contracts, and be involved in legal proceedings in its own name.
• Limited Liability Protection: One of the most significant advantages is the limited liability offered to the partners. The personal assets of the partners are protected against business debts and obligations. This is not the case in a conventional partnership.
• Perpetual succession: An LLP continues to exist regardless of changes in partnership. This means that the admission, resignation, or death of partners does not affect its existence, rights, or obligations.
• No minimum or maximum limit on partners: LLPs can be formed with any number of partners without an upper limit.
• Flexibility in operation and management: LLPs provide flexibility similar to a partnership, especially in terms of internal management structure, which is determined by the LLP agreement among partners.
• Compliance and regulatory requirements: LLPs have fewer compliance requirements compared to Companies, making them a simpler and more cost-effective option for small businesses and professionals.
• Taxation: The taxation of LLPs in Malaysia is at an entity level, offering a simpler tax structure compared to corporations.

Benefits and Disadvantages of LLP

The table of advantages and disadvantages below highlights the balance between the flexibility and protection offered by an LLP along with the operational and administrative aspects that need consideration.

Examples of LLPs in Malaysia

In Malaysia, Limited Liability Partnerships (LLPs) are a popular choice for a variety of business fields, particularly among professionals and small to medium-sized enterprises (SMEs). 

While specific examples of LLPs operating in Malaysia are not readily available in public domain sources, we can look at the types of businesses and professions that commonly adopt the LLP structure based on the nature and benefits of LLPs.

LLPs in Malaysia are often favoured by:

1. Professional Service Providers: This includes legal, financial, and company secretarial firms. Professionals in these fields choose LLPs for their flexibility and limited liability features.
2. Startups and Small to Medium Enterprises (SMEs): The LLP structure is beneficial for smaller businesses due to its lower compliance requirements compared to corporations and the protection of personal assets.
3. Joint Stock Companies and Venture Capital Businesses: These entities may also find LLPs advantageous for their operational flexibility and ease of managing internal arrangements through partnership agreements.

How to Register an LLP in Malaysia: Step-By-Step Guide

Registering a Limited Liability Partnership (LLP) in Malaysia involves a straightforward process, primarily managed through the MyLLP Portal of the Companies Commission of Malaysia. Here is an elaboration on the steps involved:

Step 1: Preparation: 

Before starting the registration process, you need to gather necessary information such as the proposed name of the LLP, nature of business, details of all partners, details of the compliance officer, and a registered office address.

Step 2: Name reservation: 

The first step is to reserve a name for your LLP. This involves checking the availability of the desired name and submitting a Name Reservation Form to the SSM for approval. There's a fee associated with this process, and the name, once approved, is reserved for a certain period.

Step 3: Online registration: 

After name approval, the next step is to register the LLP online through the MyLLP portal. This involves filling out the LLP registration form with all required details, such as partner information, business nature, and compliance officer details.

Step 4: Compliance officer: 

The LLP must appoint a compliance officer, who can be one of the partners or someone qualified under the Company Act 2016. The compliance officer must be a Malaysian citizen or a Permanent Resident (PR) and reside in Malaysia.

Step 5: Submission of documents: 

Along with the online application, you need to submit relevant documents such as partner details, the compliance officer's information, and approval from a professional body, if applicable (especially if the LLP provides professional services like legal or auditing).

Step 6: Payment of fees: 

The registration process includes a fee, which is MYR 500 as of the latest information. This fee is paid upon submission of the application.

Step 7: Approval and registration: 

Once the application and payment are processed, which typically takes about 4-7 business days, a notice will be issued at the time of registration. This document serves as proof of the existence of the LLP.

Step 8: Post-registration compliance: 

After the LLP is registered, it must comply with ongoing requirements, such as filing annual returns and maintaining proper financial records.

Conclusion

The LLP framework reduces compliance requirements compared to corporations, making it cost-effective and practical for startups and professionals. With features like perpetual succession, no cap on the number of partners, simpler taxation at the entity level, and no mandatory audit for small LLPs, this structure is increasingly attractive. 

However, it faces limitations such as challenges in raising capital and relatively lower public awareness compared to incorporated companies.

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