Malaysian company laws allow business owners to undertake different business ventures by using one of several business entities. When starting a business, business owners have to choose which business entity will be used for the running of business operations. Malaysian company laws allow for the setting up of sole proprietorships, partnerships, limited liability partnerships, limited liability companies, and private limited companies. This article will discuss information about the most recent addition to the list of legal business entities in Malaysia. This business entity is the limited liability partnership (LLP). In Malaysia, LLPs were brought into active recognition in 2012 through the introduction of the Limited Liability Partnership Act 2012. This act allowed business owners to use this business entity for the setting up of a business instead of using a sole proprietorship, limited liability company, partnership, or private limited company.
Definition of a Limited Liability Partnership
A limited liability partnership or LLP is a hybrid version of a partnership that combines the advantages of a limited liability company (LLC) and those of a partnership. To provide further clarification about the details of an LLP, the differences between a partnership and a company must first be discusses.
A partnership is a business entity which has two or more owners who have agreed to share the responsibilities and profits of the business. A partnership has unlimited liability. This means that should the partnership ever be sued, the owners’ assets can be used to settle debts or fines which may have been imposed through a court ruling. For this reason, the existence of the partnership and the financial status of the partners who own the partnership are closely linked because any matter which has a significant effect on the business will also have a significant effect on the individual partners and vice versa. A company, on the other hand, has multiple shareholders who hold varying amounts of shares in the company. A company is a legal entity which has limited liability. This allows it to either sue or be sued itself. A company is separate from its owners. For this reason, the assets of a company’s owners or shareholders may not be used to pay for any debts which the company may owe.
If you happen to be interested in starting an LLP, a partnership, or any other business entity in Malaysia, we at Paul Hype Page & Co will be able to serve your needs. We will ensure that the process of incorporation and registration of the business in Malaysia is done according to all existing laws and regulations. Through the use of our services, you will be able to run the business without facing any serious issues.
A limited liability partnership combines two important business concepts; that of limited liability and that of a partnership. In an LLP, the partners who own it are independent of the partnership itself. Thus, the partnership operates in a similar manner as does a limited liability company; however, the key difference lies in the fact that the ownership terms are to adhere to the Partnership Act as prescribed by Malaysian company laws. Any business owners planning to establish an LLP in Malaysia must create a partnership agreement that contains the details of the partnership. Such details include but are not limited to partners’ responsibilities as well as how the LLP’s profits are to be shared.
In Malaysia, an LLP may either have limited or general partners. A limited partner does not have any liabilities with the partnership. For this reason, a limited partner’s personal assets cannot be used to settle the debts owed by the partnership. On the other hand, a general partner is liable for any debts which may have been incurred by the partnership. This allows a general partner’s assets to be used to pay for any debts which partnership may owe. In this regard, an LLP possesses characteristics of both partnerships and limited liability companies alike.
Requirements for Setting Up a Limited Liability Partnership in Malaysia
In order to set up an LLP in Malaysia, the business owners must first provide a proposed name to the Companies Commission of Malaysia (SSM) which is the organization tasked with overseeing the registration process. The owners are also required to provide a document describing the general nature of the proposed business. This information is crucial for the determining of the legality of the LLP.
The owners must also provide a list of all partners who will be involved in the ownership and operations the LLP. To adhere to Malaysia’s compliance regulations, the owners must appoint a compliance officer or officers who will ensure that the registration process adheres to the country’s laws and regulations. The list must include the official names and details of all partners of the LLP as well as those of the compliance officers.
Should the LLP intend to provide professional services such as law practice or auditing, the owners must provide evidence of approval from the governing authorities. This approval may be in form of a letter of approval, a license, or a certification that allows members of the LLP to provide professional services. The owners of the LLP must also provide all other information specified by the Registrar who is in charge of the registration of the LLP.