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.
A limited Liability Partnership will find it harder to access to fundings. Even though the Company is able to open a corporate bank account under its own name, however, due to most bankers are still skeptical towards such business types, there are limited loan packages offered.
Third party investors are likely not interested to invest or fund such businesses.
Setting a Limited Liability Partnership may be easy initially, however, as the business grows, more partners may be involved with decision making. This will lead to possible problems when coming to a decision, especially if there is any problem amongst the partners.
As Limited Liability Partnership businesses do not rely on share options, there is no way for the business to sell its share to the public as an alternative to raise fund.
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:
Proposed name of the business
Registered office address
Details of all partners involved
Details of the appointed compliance officer
Letter of approval from professional body such as MIA (if any)
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:
One of the partners within the Company or a person qualified to act as a Secretary under Company Act 2016
At least 18 years old and is a Malaysian citizen or Permanent Resident (PR)
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.