Business Partnerships in Malaysia

7 min read|Last Updated: August 17, 2023|

There are many  types of business entities  which exist in Malaysia and one of the more popular ones is Partnership. For Partnerships, they are governed by the Companies Commission of Malaysia – Suruhanjaya Syarikat Malaysia (SSM) and Registration of Businesses Act 1956.

Definition of a Partnership

A partnership is a business entity owned by two (2) persons but not exceed to twenty (20) persons at one time. An identity card name is not allowed to be used as a business name such an entity. Only a local Malaysian or Permanent Resident (PR) is allowed to register a Partnership to run their business.

Some of the unique features a Partnership includes:

  • Fast and easy registration

  • No corporate tax payments

  • Less formal business requirements

  • Easy wind-up process

  • Lowest annual compliance cost

The aim for Partnerships is for start-up businesses to test their business strategy and explore a new market. The partnership agreement is normally drawn up by an appointed legal counsel, which outlines the responsibilities and liabilities of each partner, conditions of termination, and the means of resolving intra-partner disputes.

All partners involved are required to share the profits and liabilities in the business depending on the percentage that they have invested.

Types of Partnerships in Malaysia

  • Conventional Partnership

    The conventional partnership is governed by the Partnership Act 1961. A partnership comprises 2 or more owners, with a cap of 20 owners who pool resources to pursue profit through shared business efforts.

    Partnerships, fitting for professional practices like auditors and lawyers, are exclusively open to Malaysian citizens and permanent residents.

    Profits and liabilities are distributed among partners. While the partnership itself is not taxed, partners are individually taxed and must report gains and losses. Like sole proprietorships, partners face unlimited liability.

  • Limited Liability Partnership

    Governed by the Limited Liability Partnership Act 2012, a limited liability partnership (LLP) can be established by 2 or more individuals or corporations.
    Unlike a regular partnership, an LLP is a distinct legal entity with the ability to initiate legal actions, respond to lawsuits, and manage property ownership. Read more about LLP on our other article here.

Malaysia Corporate Secretary Liyana

Advantages of Starting a Partnership in Malaysia 

The reasons why a Partnership is the preferred entity for business owners in Malaysia are as follows:

  • Sharing of responsibility

    In a Partnership, the partners will need to share the responsibilities to run the business. This procedure allows each partner to fully utilise their individual capabilities and specialities, combining these skills to ensure the business run smoothly and generate income.

  • No corporate tax payments

    A Partnership is not considered as a legal entity, hence all chargeable income generated by the Company will be charged on all partners personal income tax instead of a corporate tax.

  • Lowest annual cost

    Compared to other types of business entities, a Partnership in Malaysia is only required to file annual renewal fee costing MYR 60 for trade name per annum. It is relatively a simple and straight forward submission to SSM.

  • Easy wind-up process

    If the business is deemed no longer profitable for the partners, they are allowed to visit any SSM branch to wind up the Company. Also, if the Partnership did not file its annual renewal fee on time, SSM can automatically close the business as per enacted in the Registration of Businesses Act 1956.

  • Minimum entry requirements

    The entry requirement for Partnerships is very simple as they only need at least 2 Malaysian citizens or permanent residents (PR) with legitimate Malaysia local residential address. The cost to start the business is only MYR 60 for a trading name.

Disadvantages of Starting a Partnership in Malaysia

Of course, there are also certain disadvantages when it comes to establishing a Partnership in Malaysia.

  • A conventional partnership is not a separate legal entity. This means, the partners are jointly and severally liable towards the debts and liabilities accumulated by the business. If any of the partners has filed for bankruptcy, creditors have the right to sue the partners involved to claim the debt owned which will directly impact each partners personal wealth.
  • If there is an internal dispute between the partners, they are not allowed to expel any partners unless a power to do so has been conferred by a written agreement between the partners during the establishment of the business. This can lead to bad relationship amongst partners and bad decision making for the business.

  • As shared previously, the partnership is not liable towards corporate income tax. However, each partner is liable to disclose the profits they received from the business in their personal income tax filing. This will lead to a higher tax payable for their personal income tax.

Partnership Agreements

A partnership agreement is a formal contract which legally binds the partners. This agreement serves to delegate their respective rights, duties, and the division of profits and losses. Additionally, it establishes fundamental guidelines governing the partnership, encompassing aspects like capital contributions, withdrawals, and financial reporting. While the Partnership Act 1961 does not make partnership agreement mandatory, having a written partnership agreement is strongly recommended to formally lay down operational guidelines, promotes business efficiency, and mitigates potential disputes and misunderstandings among partners.

Partnership agreements commonly include among others – the partners’ assumptions, assets and capital accounts ownerships, profit and loss sharing, practice management, dispute matters, expulsion, and death, disability or resignation.

In preparing a partnership agreement, the Malaysian Bar has created a checklist of details to be included.

Rights and Liabilities in a Partnership

Section 26 of the Partnership Act 1961 outlines the obligation of partners. Partners must adhere to the obligations listed below unless there are specific exceptions entailed in the partnership agreement.

  • Equal sharing of capital and profits, and equal sharing of losses regardless of contributions or efforts.
  • Partnership must reimburse partners for expenses and liabilities incurred in standard business operations or property preservation.
  • Partners who exceed their agreed capital are entitled to 8% annual interest.
  • Partners don’t receive interest on contributed capital until profits are determined.
  • Partners can manage the business, except if daily management is designated to a manager.
  • Partners aren’t compensated for participating in business operations.
  • New partners require unanimous consent from existing partners.
  • Ordinary business matters are decided by a majority, major changes necessitate unanimous agreement.

Guidelines on termination of Partnership in Malaysia

When it comes to Partnership laws, every country has its own set of regulations – Malaysia is no exception. A Partnership in Malaysia can be dissolved for any of the reasons below:

  • Cessation of business

  • Bankruptcy  

  • Death of owner

  • Pursuant to court order

The procedure to proceed with the termination is as follows:

  • The owners have to complete the Notification of Termination Registered Business (Form C) accordingly. This can be retrieved in SSM official website.

  • Every partner involved must sign the completed form accordingly.

  • The form can be submitted over any SSM counter or via online portal at (only for cessation of business only).

  • The documents to be attached during submission includes:

    • Business registration certificate
    • Clear copy of partners’ NRIC
    • Clear copy of death certificate of partner (if any)
    • Clear copy of court order termination (if any)
    • Relevant documents proving the owner was declared as bankrupt (if any)

The registration fees: 

  • Notification of termination of registered business – No fees applicable

  • Business information – MYR 10

Once everything is in order, partners can proceed with the termination of the partnership in Malaysia as below:

  • Business termination to be registered within thirty (30) days from date of business termination

  • Registered business that has not expired is allowed to submit Notification of Termination of Registered Business

  • Submit the Notification as result of death within four (4) months from date of demise

  • Confirmation letter on expired business can be requested from SSM with payment of MYR 10

  • Results can be obtained within fifteen (15) minutes from the time submission is made

We know that incorporating a company in Malaysia can be challenging and choosing the right business entity is crucial to set up your business to success. Speak to us for a business consultation or for more information on company incorporation in Malaysia!


Come down to our office or connect with us virtually for an incorporation assessment today to find out the best entity for your Malaysia company setup.


Can Partnerships in Malaysia besubsquently converted to other Business Structures?2020-04-28T16:55:31+08:00

It is possible to convert partnerships to other business structures in Malaysia. The most common course of action taken is that of converting a partnership to a limited liability partnership. The criteria to convert a partnership to a limited liability partnership include the following: the partners are to be the same after conversion, the partnership to be converted must be financially solvent, and a letter of approval from any relevant governing bodies will be required. After conversion is completed, the partnership is considered to have been dissolved. As conversion is a complex and difficult process, this change is one which should only be done after receiving the advice of both a legal advisor and a tax advisor.

Which Industries in Malaysia have many Companies which are Partnerships?2020-04-28T16:54:40+08:00

The industry in Malaysia which has the most partnerships is the construction industry. Malaysia has a large construction industry which is worth over RM102.2 billion (US$24.3 billion). The areas of the construction industry in which partnerships are most prevalent are those related to construction of non-residential buildings, civil engineering, residential buildings, and special trades.

Other industries in Malaysia with many partnerships that contribute in the economy of the country include the electronics industry, defense industry, and automotive industry.

Are Foreigners allowed to Start Partnerships in Malaysia?2020-04-28T16:53:52+08:00

Foreigners who plan to start a business in Malaysia should note that they are not allowed to start unlimited companies, sole proprietor companies, partnerships, enterprises, or limited liability partnerships in Malaysia. Foreigners are only allowed to register private limited companies, also known as Sendirian Berhad (Sdn Bhd)  companies. Companies of this business structure can be owned by foreigners.

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