In Malaysia, there are many types of business entities for an entrepreneur to run his business. Each business entity has their own pros and cons, and it is crucial for entrepreneurs to understand them before incorporating a company.
One of such business entities is a Limited Liability Partnership. This business entity is regulated under the Limited Liability Partnership Act 2012 which combines the characteristics of a Private Limited Company (Sdn. Bhd.) and the conventional Partnership.
Definition of a Limited Liability Partnership
A Limited Liability Partnership is a hybrid version of the conventional partnership and a Private Limited Company (Sdn. Bhd.). Some of the unique features of a Limited Liability Partnership includes:
Before the Limited Liability Partnership was introduced, local entrepreneurs are prone to registering either a sole proprietorship or the conventional partnership. These two options are commonly preferred by the local entrepreneurs as:
However, as time goes by, more entrepreneurs are entangled with their own belief and more downsides are exposed when they venture into these two types of business entities. Not only will the owners be liable towards all the debts accumulated by the business over the years, if they were to declare bankruptcy, creditors have the right to sue them in order to claim the debt owed.
Why register Limited Liability Partnership (LLP) instead?
Over the years, the Companies Commission of Malaysia abbreviated SSM (Suruhanjaya Syarikat Malaysia) have discussed thoroughly how are they able to assist the local entrepreneurs with their small medium businesses without too much impact towards their personal wealth.
In 2012, they enacted the Limited Liability Partnerships Act 2012 where the Limited Liability Partnership (LLP) entity is designed for business owners to generate profit and indirectly boost the local economy. The aim was for professionals such as lawyers, accountants and company secretaries to use this vehicle to carry out their professional practice. The concept will also support start-ups, small and medium enterprises (SMEs) to grow their businesses without worrying too much on their personal liabilities, personal wealth as well as strict annual compliance requirements.
Advantages of Limited Liability Partnership
Having understood the fundamentals of a Limited Liability Partnership, let’s take a look at the advantages such a business entity brings to business owners.
Disadvantages of Limited Liability Partnership (LLP)
While entrepreneurs may feel that incorporating a Limited Liability Partnership company has its advantages, there are some drawbacks that you should consider before making the final decision.
Requirements to Setup a Limited Liability Partnership in Malaysia
After considering the advantages and disadvantages and believing that a Limited Liability Partnership is the best entity for your company, registration must be done online in the MYLLP website by a registered Compliance Officer of the entity on behalf of the partners.
The items needed to setup are:
The information above is crucial for the Companies Commission of Malaysia (SSM) to determine the legality of the business the entity will be running.
The owners must also provide a list of all partners who will be involved in the ownership and operations within the entity as well as the appointed compliance officer.
If you are wondering who can be appointed as the compliance officer, you may refer to the criteria below:
Should your Limited Liability Partnership intend to provide professional services such as law practice or auditing, the owners must provide evidence of approval from the governing authorities. This may be in the form of a letter of approval, a license, or a certification that allows members in the Limited Liability Partnership to provide professional services.
The cost to setup a Limited Liability Partnership is only MYR 500 and the incorporation is instant upon submission of the application through MYLLP website. Once the incorporation is done, SSM will issue the notice of registration as proof of the Company’s existence.
How is a Limited Liability Partnership in Malaysia Taxed?
Based on the public ruling no. 3/2014 published by the Inland Revenue Board of Malaysia (LHDN), there is a specific tax treatment for a Limited Liability Partnership. First, the income generated within the Limited Liability Partnership will be taxed at its level. Therefore, any provision of the Income Tax Act 1967 (ITA), exemption order and income tax rules applicable shall apply to the Limited Liability Partnership.
Businesses who generated income with a total capital contribution of MYR 2.5 million or below in Malaysia will be taxed at 20% for every first MYR 500,000 of its chargeable income.
However, the rate above does not apply to a Limited Liability Partnership if more than:
Limited Liability Partnerships with capital contribution less than MYR 2.5million is eligible to deduct certain incorporation expenses under the Income Tax (Deduction for Incorporation Expenses) Rules 2003 and Income Tax (Deduction for Incorporation Expenses) (Amendment) Rules 2005.
For more in-depth information on this topic, you may visit this website: http://phl.hasil.gov.my/pdf/pdfam/PR2_2010.pdf
Even though a Limited Liability Partnership is not required to prepare an audited financial statement, the Company is required to keep the following records for the appointed Compliance Officer to file the taxes:
Whether you’re a looking to incorporate a new company in Malaysia or need help with filing your taxes, you can entrust us to help you to do so while you attend to your business needs! Reach out to us to find out more.
Compliance officers are defined as people who are tasked with ensuring the legal and regulatory compliance of an LLP. In Malaysia, LLPs are not required to appoint compliance officers; however, such a move is nevertheless beneficial and highly advisable.
Malaysian company laws state that an LLP must have at least two owners. However, there is no mention made about the maximum number of owners which an LLP may have. This means that there is no upper limit on the number of owners of an LLP.
Ever since its introduction, there have not been any mentions of any possible amendments to the Limited Liability Partnership Act 2012. There have also not been any mentions of the possibility that it might be rescinded. Therefore, the Limited Liability Partnership Act 2012 is expected to remain in its present form.
Hi there, I like to know how the procedure if one of the partner (shareholder/director) want to transfer share to another partner(shareholder/director) in PLT Company.
Is it any specific form of transfer share required as like SDN BHD company…issue form 32.
For share transfer, you will need to obtain approval from the Board of Directors. If approved, you are required to complete the Share Transfer Form (Form 32A) – this will need be witnessed by a neutral party. After which, completion of the transfer will be stamped at any LHDN office.
You need to make sure the right paperwork is used. The best will be to get your company secretary to assist you with it.
Should you require a company secretary to assist, feel free to reach out to us on WhatsApp and we’ll can share more about our services.
Hi there, is it possible for a group of people (let say A, B, and C) to own two PLT with the same amount of percentage ?
Is it consider as same entity or separate entity? Does the account need to be merge or is there any tax regulation to be followed?
Had search so much online but there is no answer. Please help! thank you very much!
Your question has been answered under our forum.
Feel free to interact with us in the forum if you need further clarification. We will be happy to assist.
Hi, are there tax deduction for PLT company something similar to what we have for personal income tax, or can things like petrol meals etc be considered as the PLT cost of business?
for your year end tax filing, you can deduct business expenses from your taxable income, thus reducing the amount of tax you need to pay. Business expenses are expenses you have paid to run the business. Transport and entertainment expenses should be part of your business expense and subjected to varying tax rules.
Please contact us via Paul Hype Page to discuss further.
Hi, I have an inquiry for PLT company. If my partner want to sell out all his share to me, can I ask my spouse to be my PLT partner? Currently only 2 partners in this company.
There is no restriction imposed on the identity of any partner of a PLT company in Malaysia. Thus, your spouse is permitted to be your PLT partner.
For further information on PLT companies, please contact us.
Thank you for your question.