top of page
  • Writer's pictureRajvin Singh Gill

Why a Limited Liability Partnership may work best for your business

Updated: Jun 26, 2023

An LLP in Malaysia, governed by the Limited Liability Partnerships Act 2012 ("Act"), is a type of business entity that merges the features of a private company and a traditional partnership. Here are a few advantages of opting for an LLP in Malaysia:


Limited Legal Liability

The name itself implies that an LLP in Malaysia offers a safeguard by segregating the legal identity and capabilities of the partners and the corporate entity, thereby restricting liability among business partners. In the event of a claim, the personal assets of the partners are protected and cannot be seized. This distinct feature sets an LLP apart from general partnerships or sole proprietorships, where all assets of both the business entity and the partners/proprietor are susceptible to claims.

This principle also applies to debts owed by either the LLP or the partners. Debtors of the LLP cannot access the personal assets of the partners, and vice versa.


"Perpetual Succession"

An important characteristic of an LLP is its ability to maintain continuous existence unless legally dissolved. Referred to as "perpetual succession" by the Companies Commission of Malaysia (CCM), this feature ensures that the LLP can continue operating without interruption even if a partner departs or there is a change in ownership.

It is essential to note that an LLP must have a minimum of two (2) partners. If the LLP operates with fewer partners than the minimum requirement for a period of six (6) months or any other duration specified by the CCM, the concept of "perpetual succession" will cease to apply. In such a case, the LLP will be legally dissolved in accordance with the provisions of the Act.


Flexibility

An LLP offers flexibility through a partnership agreement that is to be established among its partners. This agreement grants the freedom to select the most suitable business model that aligns with the partners' needs and requirements for their business structure. In the absence of such an agreement, the second schedule of the Act outlines the default provisions for an LLP.


Compared to a traditional company like a private limited company, an LLP provides additional flexibility by eliminating certain requirements:

  1. The formal obligation of holding annual general meetings.

  2. The necessity to submit financial statements to the CCM.

  3. The requirement for a statutory audit of its accounts.

Furthermore, the ownership of an LLP can be easily transferred in accordance with the partnership agreement by appointing new partners or removing existing ones. The agreement also allows for modifications to the terms of profit sharing and remuneration resulting from such changes.


Should you wish to schedule a free consultation to chat more about this topic, please do not hesitate to contact us.





bottom of page