This guide will provide you with insights into the concept of LLP (Limited Liability Partnership) in Malaysia, including the process of LLP registration in Malaysia and the associated compliance obligations. While self-registering an LLP through the MyLLP Portal at https://ssm4u.com.my/ may seem straightforward, it’s important to note that there are numerous compliance requirements that must be adhered to.

 

LLP represents an alternative business structure regulated by the LLP Act of 2012. It combines elements of both a traditional partnership and a company, offering benefits akin to a private limited company (Sdn Bhd). These advantages include limited liability, perpetual legal existence, and cost savings on compliance due to reduced statutory obligations—such as not being obligated to maintain audited accounts or appoint a qualified Company Secretary.

 

Before You Register LLP in Malaysia

Please keep the following LLP details in mind:

  1. LLP Name: You must obtain approval for the name you choose for your LLP.
  2. Partners: You are required to have a minimum of two partners, but there is no maximum limit on the number of partners. Partners can be individuals (natural persons), corporate entities, or a combination of both. It’s not mandatory for partners to have their primary place of residence in Malaysia, unless they are designated as the compliance officer for the LLP.
  3. Compliance Officer: According to the LLP Act of 2012, at least one compliance officer must be appointed by the LLP. This individual must either be one of the LLP’s partners or a person qualified to act as a secretary under the Companies Act of 1965. They should be at least 18 years old, a citizen or permanent resident of Malaysia, and reside in Malaysia.
  4. Registered Address: You must maintain a registered office in Malaysia to receive all communications and notices. This office can be either residential or commercial but cannot be a post office box.
  5. Taxation: The taxation treatment of an LLP is similar to that of a company. Income generated by the LLP is subject to taxation at the LLP level. If an LLP is resident in Malaysia and its total capital contribution at the beginning of the assessment year is RM2.5 million or less, it may be eligible for a lower tax rate of 20% on the first RM 500,000 of its chargeable income.

 

 

Other Key-Considerations When You Setting Up Your Own LLP

 

Partnership Agreement:

The mutual rights and responsibilities of the partners within a Limited Liability Partnership (LLP), as well as those of the LLP itself, are defined by the LLP agreement. However, in cases where there is no agreement in place regarding any of the matters specified in the Second Schedule of the LLP Act 2012, the provisions outlined in the Second Schedule pertaining to that specific matter will be applicable.

 

Default Provisions for LLP as per the Second Schedule of the LLP Act 2012:

  1. All partners are entitled to an equal share in the capital and profits of the LLP.
  2. Each partner has the right to participate in the management of the LLP.
  3. No partner is entitled to receive remuneration.
  4. Any matter concerning the LLP is to be determined by a resolution passed by a majority of partners, with each partner having one vote for this purpose.

 

Partners of an LLP are strongly advised to draft a comprehensive agreement when establishing the LLP business to prevent potential future disputes among partners.

 

Key Considerations When Crafting the Partnership Agreement:

  1. Define the rights and obligations of the partners.
  2. Specify the distribution of profits among partners.
  3. Outline the capital contributions of each partner.
  4. Detail the management and control of the business.
  5. Address any provisions regarding the remuneration of partners.
  6. Establish guidelines for the holding of property.

 

Tax Planning and Professional Guidance

Before launching your business, it is essential to engage in tax planning to optimize tax efficiency. Here are some considerations:

  1. Understanding the Tax Treatment for LLP.
  2. Determining whether all partners should be entitled to remuneration.
  3. Identifying which expenses are eligible for deductions.
  4. Exploring potential tax incentives available to the LLP.
  5. Evaluating the GST implications for your new business.

 

As an illustrative example of tax planning, it may be advisable to incorporate partners’ remunerations into the partnership agreement to ensure that they qualify for tax deductions.

 

Necessary Details and Documentation

To facilitate the registration process with the Registrar (SSM), the following information and documents are required:

  1. The chosen name for the intended LLP.
  2. A brief description of the primary nature of the proposed business activities of the LLP.
  3. The intended location of the LLP’s registered office.
  4. Comprehensive information and particulars of each individual designated as a partner within the LLP.
  5. Comprehensive information and particulars of the appointed compliance officer(s) for the LLP.
  6. In cases where the LLP is established for the purpose of engaging in professional practice, the application should be accompanied by an approval letter from the governing body specified in the third column of the First Schedule of the LLP Act 2012.

 

Registration Process and Timetable

The registration of an LLP typically follows a procedure that spans 4-7 business days, contingent upon the availability of the MyLLP Portal and SSM office systems.

 

Step 1:

Reservation of Your LLP Name Before proceeding with registration, it is imperative that the Registrar approves your chosen LLP name.

Certain terms, such as “account,” “law,” or “consultancy,” which might suggest that the LLP is intended for professional practice, could lengthen the approval process. In such cases, the application must be accompanied by an approval letter from the relevant governing body.

To expedite this stage, select a name that:

  1. Differs from any existing local LLP names.
  2. Does not infringe on any trademarks.
  3. Is devoid of offensive or inappropriate content.
  4. Has not already been reserved.

The reserved name remains valid for thirty (30) days from the date of Registrar approval.

 

Step 2:

LLP Registration Once your LLP name garners approval from the Registrar, you will need to remit a registration fee of RM500 to the Registrar.

 

Step 3:

Application for Certificate of Registration & Business Profile Certificate of Registration Upon successful LLP registration, you will receive an email notification from the Registrar, confirming the incorporation of your LLP along with the LLP Registration Number. You will need to apply for the certificate of registration from the Registrar, with a fee payable to SSM amounting to RM20 per copy.

Business Profile Following the conclusion of the registration process, the Registrar will generate a business profile for your LLP. The business profile provided by the Registrar includes essential details such as:

  • LLP name and registration number.
  • Any previous names the company may have had.
  • Date of registration.
  • Nature of business.
  • Registered address.
  • Address of the place of business.
  • Partner information.
  • Compliance Officer details.

With the certificate of registration and business profile in hand, you can proceed with all the necessary legal and contractual tasks required in Malaysia. This may entail opening a corporate bank account, securing office space, or establishing phone and Internet services.

 

Ongoing Responsibilities of an LLP

Now that your LLP is officially registered, you can commence your business operations. However, it’s crucial to remain mindful of the continuous obligations associated with your LLP, which encompass reporting changes, maintaining accounting records, submitting annual declarations to SSM, ensuring tax compliance, and adhering to other statutory requirements.

 

  1. Reporting Changes in Particulars:
    • An LLP is required to promptly notify the Registrar of any modifications or alterations to its registered details within fourteen days from the date when the changes occurred.
  2. Maintenance of Registers and Statutory Records:
    • The registered office of the LLP must maintain the following:
      • The notice of registration issued by the Registrar of LLP.
      • A register containing the names and addresses of each partner and compliance officer.
      • A copy of the most recent annual declaration.
      • Copies of any statements submitted to the Registrar under the LLP Act 2012.
      • Copies of certificates (if any) issued by the Registrar under section 11(4) of the LLP Act 2012.
      • Copies of the LLP agreement and any subsequent amendments.
      • Copies of documents pertaining to any charges created by the LLP.
      • Any other documents as required by the Registrar from time to time.
  3. Keeping of Accounting Records:
    • The LLP is obligated to maintain comprehensive accounting and other records that sufficiently elucidate its financial transactions and status. These records should enable the preparation of profit and loss accounts and balance sheets, providing a true and fair view of the LLP’s financial condition.
    • These records should be kept at the registered office of the LLP or at another location as decided by the partners, provided that the Registrar is notified of this alternate location.
  4. Retention of Records:
    • The LLP is required to retain its accounting and other records for a minimum of seven years from the completion of the financial year to which they pertain.
  5. Annual Declaration:
    • On an annual basis, within ninety days from the end of the financial year, the LLP must submit a declaration to the Registrar. This declaration, endorsed by any two of its partners, should affirm whether the LLP can meet its debts as they become due in the normal course of business. It should also include any additional information requested by the Registrar.
    • For the initial annual declaration, it must be submitted no later than 18 months from the date of LLP registration or within 90 days from the end of the financial year, whichever comes first.
    • Failure to submit the Annual Declaration within the stipulated time frame may result in penalties, with a fine of up to RM20,000 and an additional daily fine of up to RM500 for each day the offense continues post-conviction.
  6. Extension of Annual Declaration Submission to SSM:
    • If you require additional time to submit the Annual Declaration, you may apply for an extension. This application should be made after the financial year ends and at least 30 days before the original due date. A fee is associated with this request.
    • Acceptable reasons for an extension include:
      • Partner or compliance officer’s death (supported by a death certificate).
      • Natural disasters (e.g., fire, flood) that destroyed records (supported by a police report).
      • Theft (supported by a police report).
      • The LLP is under investigation, and records are in the possession of SSM or other authorities (supported by relevant documents/letters).
      • The LLP is involved in a court case (supported by relevant documents).
      • Any other reason deemed suitable by the Registrar for granting an extension.
    • Please note that the Registrar retains the right to reject extension applications if the reasons provided are not deemed sufficient. The application fee will not be refunded in such cases.
  7. Tax Compliance:
    • This includes:
      • Registering for tax files, including sales, services tax, and GST.
      • Filing taxes.
      • Estimating tax liabilities and making tax payments.