There are many types of business entities which exist in Malaysia. Among these are the sole proprietorship, partnership, private limited company, and limited liability company, among others. This article will discuss the partnership, the details of one, and the advantages and disadvantages of owning one in Malaysia.
Definition of a Partnership
A partnership is one of the primary business entities in Malaysia. In a partnership, there are at least two partners or owners and a maximum of 20 owners. It can be established on a small scale, making it a viable option for start-ups. Those who know that their business is to be owned and operated by more than one individual should consider selecting the partnership as their business structure of choice. There are two varieties of partnership in Malaysia. These are the partnership and limited liability partnership respectively. In a partnership, the partners jointly manage the company. They also will have joint responsibility for the partnership’s debts and other liabilities. The owners of the company have unlimited liability. In Malaysia, partnerships have certain similarities with sole proprietorships. However, there are two key differences between partnerships and sole proprietorships. The first and most important is, of course, the minimum number of owners. A partnership requires at least two; a sole proprietorship, just one. Partnerships are also governed by Malaysia’s Partnership Act of 1961. As is implied by its name, this act only pertains to partnerships; therefore, sole proprietorships are unaffected by this important piece of legislation.
A limited liability partnership is a partnership which includes elements that exist in both a partnership and a company. In a sense, a limited liability partnership is a hybrid of the two. In a limited liability partnership, the partners who own the company have limited liability related to the financial losses of the company. Most people who select this type of business entity own a small-scale business. Much like sole proprietorships, limited liability partnerships are therefore commonly owned by those who own small and medium enterprises (SMEs).
In Malaysia, the business profits of partnerships are taxed at the individual personal tax rate of each partner involved. Therefore, a partnership does not pay taxes on its business income but instead moves the tax burden to the individual partners. For this reason, tax planning opportunities for those who own a partnership are somewhat limited.
Due to the fact that tax planning for a partnership may sometimes be difficult, you may need the services of experts. This is where we at Paul Hype Page & Co can come in. Our knowledgeable and experienced tax team will provide the best tax advice possible for your partnership. We will see to it that you receive tax planning suggestions which will help your partnership thrive.
Advantages of Starting a Partnership in Malaysia
Establishing a partnership in Malaysia allows its owners to benefit from several advantages. One of these advantages is the fact that owners are able to collaborate to generate more effective business ideas. Highly skilled employees can also be made partners, thus leading to better ideas and more revenue being generated.
From a financial perspective, a partnership is relatively easy to establish and start-up costs are low. Input from multiple owners also assures that more capital is available for business operations. Therefore, the owners will have greater borrowing capacity when compared to the owner of a sole proprietorship. Partnership owners might also benefit from income splitting, which is an advantage that may even bring about significant tax savings.
Partnerships also have several legal advantages. In a partnership, all of the partners’ business affairs reman private and external regulation is reduced. Furthermore, it is also relatively easy to change the business structure if circumstances demand that such be the case.
Having read about the potential advantages brought about by a partnership, you might have become interested in starting a partnership of your own in Malaysia. If such is the case, or if you would like to start any other business entity in Malaysia, we at Paul Hype Page & Co will contribute our best input. We will take you through the entire process of incorporation. We will see to it that your company in Malaysia is set up in as simple and smooth a manner as possible.