Partnerships in Malaysia
Partnerships are jointly owned by two or more individuals. They have similarities to sole proprietorships but differ in two ways. They differ because partnerships are to either have self-created partnership agreements or be governed by the Partnership Act 1961. Furthermore, sole proprietorship are run by one person, while partnerships are run between two and 50 people. In Malaysia, the businesses which make the best use of partnership structures are small and medium-sized enterprises (SMEs). This is because partnerships provide certain advantages for SMEs. These include a low startup cost, low maintenance costs, ease of incorporation with the Companies Commission of Malaysia (SSM), shared liability among all partners, and tax rates tailored to suit each partner.
However, partnerships also have certain disadvantages. The nature of a partnership prevents many partnerships from keeping proper accounting records. Tax planning with regard to a partnership may also be fairly difficult. The business continuity of the partnership will be affected if a partner dies, quits, or leaves the partnership in any other manner. In such a situation, the business could be closed or the beneficiaries might not receive what the departed partner left behind. Partnership owners also generally find it somewhat difficult to receive important bank loans.
Sdn Bhd Companies in Malaysia
A Sdn Bhd company is a business entity with limited liability. This business entity structure is the best choice for an experienced entrepreneur in Malaysia. Sdn Bhd companies also have certain unique benefits. For example, the liability of a Sdn Bhd company is limited. An entrepreneur’s personal wealth is therefore protected if the business suffers severe losses or fails. Another major advantage of Sdn Bhd companies is that of superior management and regulation. Tax planning is also easier because the company is a separate legal entity. A Sdn Bhd company’s business continuity never ends. This is because such a company will exist even if the primary owner dies, quites, or relinquishes ownership in any other manner. It is also relatively easy to get a loan to finance a Sdn Bhd company, and accounts of such companies are generally reliable and trustworthy.
However, it should also be noted that it is relatively expensive to set up a Sdn Bhd company when compared to the setup of other business entities. Another disadvantage suffered by Sdn Bhd owners which partnership owners do not experience is the fact that standard tax rates apply. Tax rates are not set in such a way so as to suit the owners’ own income levels. Incorporation of a Sdn Bhd company with SSM is also generally more complex when compared to incorporation of a sole proprietorship or partnership.