What is a LLP?

LLP stands for Limited Liability Partnership. You would be very familiar with a private limited company, registered sole proprietorship, or a company limited by guarantee. A LLP is a new, and different, type of business vehicle/entity through which you can commence and conduct your business.

What are the other types of business vehicles/structures out there?

Private limited companies (Sendirian Berhad), companies limited by guarantee, unlimited companies, registered sole proprietorship, conventional partnership, etc.

Do different laws govern a Partnership and a Limited Liability Partnership?

A partnership is governed by the Partnership Act 1961. A LLP is governed by the Limited Liability Partnerships Act, 2012.

What are the benefits of a LLP and who should set up one?

A LLP offers the partners of the LLP the flexibility and freedom to manage the LLP’s own affairs, while allowing them to also enjoy limited liability. In this regard, it is kind of a cross between a company and a conventional partnership.

To elaborate further, the liability of individual partners in a conventional partnership is unlimited. This is one of the major drawbacks of conventional partnership.

The LLP is more like a company in that sense. The liability of the partners in a LLP in relation to say, a contractual obligation, is borne by the LLP, except for individual liability for the personal wrongful acts of the partner concerned. So except in limited circumstances, the individual partners are not liable for the debts or obligations incurred by the LLP.

A LLP is a good structure for SMEs as there are fewer compliance requirements, and a much lower level of liability for the individual business owner than he would derive from a registered sole proprietorship. It is also suitable for professional firms and joint ventures between individuals and corporate entities.

What are the criteria to form a LLP?

A LLP can be formed by two persons who could be individuals, corporate bodies or a mix of the two.
However, the objects of the LLP must be for-profit. A charitable organisation cannot register a LLP. A charitable organisation should set up a registered society, or as company limited by guarantee.
If for professional practice, some additional rules apply. For example, the shareholders must be individual persons from the same profession.

What are the characteristics of a LLP?

A LLP has legal personality, which means, it is treated separately and distinctly from the partners that it’s made up of.

It also endowed with a characteristic known as perpetual succession, which in simple terms basically means that when any partner resigns or passes on, the LLP remains intact. This characteristic is more like that of a company, and less like a normal partnership or a registered sole proprietorship.

A normal partnership dissolves upon death or resignation of any partner and the next steps are subject to the Partnership Agreement. A registered sole proprietorship cannot continue following the demise of the sole proprietor.

In comparison with a company, which is subject to the many, many rules and regulations set out in the Companies Act and related legislation, the Memorandum of Association and the Articles of Association, the management of a LLP is based on the LLP Agreement which is nothing more than an agreement between the partners, kind of like a shareholders agreement.

The agreement can cover almost all aspects of the day to day operations of a LLP. A LLP is also cheaper to run administratively and easier to manage as there are fewer reporting and disclosure requirements.

When it comes to dissolution, a LLP can be dissolved in exactly the same way that a company can. Possible mechanisms are court-ordered winding up, voluntary winding up and striking off.

How to set it up

The preliminary part of the registration of a LLP can be done via the MyLLP portal (online).

Services available via the MyLLP portal include registration as a user, application for reservation of name and application for registration for professional practice (with an approval letter from the governing body).

Additional services are available via counters at the various SSM (Suruhanjaya Syarikat or Companies Commission) offices, which include application for registration of foreign LLP, application for conversion from conventional partnership to LLP, application for conversion of private company to LLP, application for change of name, change of address of registered office, change of address of place of business, change of nature/place of business, change of particulars of partners(individual, body corporate, government agency), change of particulars of compliance officer, and submission of annual declaration by a LLP.

What are the obligations of a LLP?

A compliance officer who is either a partner or a qualified person to act as a Company Secretary, needs to be employed. He needs to be a citizen of, or normally resident in, Malaysia. His role is essentially similar to that of a company secretary’s, but there are far fewer statutory requirements to comply with.

The only potentially negative point here is that the Compliance Officer bears personal liability for his acts and omissions in the course of carrying out his duties unless a court is minded otherwise.
The LLP must maintain a registered office in Malaysia, and the relevant registers and statutory records must be kept at the said office.

The LLP must keep proper accounting records, which shall be sufficiently detailed to accurately reflect the financial position of the LLP.

An annual declaration of solvency must also be made by at least 2 partners on the solvency of the LLP.


Personal finance author and trainer

    5 replies to "A Quick Guide To Set Your Own Limited Liability Partnerships (“LLP”)"

    • Marillyn

      Hi I would like to resign as the Compliance Officer in a LLP and possibly pull out of the business – how do I go about doing this?

    • Mirra

      Compliance Officer

      Registration of LLP is made by the compliance officer appointed by LLP:

      One of his partners or a person qualified to act as secretary under the Companies Act 1965;
      At least 18 years old and Malaysian citizen/permanent resident; and
      Usually living in Malaysia.

    • Alex

      Is there anyway to close down an LLP other than voluntary winding up? The cost involved in voluntary winding up is rather high. The LLP was dormant from the day of registration.

    • Ravinder Singh

      Can you convert a LLP into a Sendirian Berhad? If yes what are the processes.

      • KCLau

        Engage a company secretary and they will advice you on the process. You will need their service to setup a Sdn. Bhd. anyway.

Leave a Reply

Your email address will not be published.