Risks of Limited Liability Partnerships You Should Know About
Apart from the plethora of advantages, the Limited Liability Partnership (LLP) has its own downsides. As a businessperson, this is something that you must be aware of so you can do something to lessen or minimize its effect. In this article, we talk about the risks of limited liability partnerships in Malaysia.
So what are these different Risks of LLP? They are the following:
The Issue of Privacy
The company has to submit its yearly report to the Companies Commission of Malaysia and this includes documents that pertain to financial performance. One information that will be there is how much the company has earned for the past year. The report also consists of information about the company’s spending on everything including the salaries of its employees.
For some people, they don’t want everybody to know how much they earn. Some just want to keep a low profile while some feel like it’s a threat to their security.
Unfortunately, financial reports are meant to be disclosed and businesspersons just have to deal with it.
The Income You Earned From LLP is Taxable
Income is always subject to tax and the same goes for LLP. However, these days, there are many incentives in Malaysia, and you can take help from tax services. Furthermore, if you want to gain more and pay less on taxes, you might consider increasing your company share because, in Malaysia, dividends are tax-free.
Profit of an LLP Business has to be Disbursed
The business entity LLP is mandated by law to distribute its income to shareholders at the end of the year. You can’t retain it for increasing the capital of the company automatically. If one of the business partners wants to increase his company share, he may do so but only after the distribution of the profit.
There Must Be at Least Two Members in an LLP Business
The mere fact it is named as Limited Liability Partnership, it’s still a partnership and requires at least 2 persons to make it happen. Should all the members in LLP leave and there be only one person left, the company may have to dissolve due to its nature that partnerships must be two persons or more.
The Disclosure of the Address of the LLP Members
It is a legal proceeding to submit to the Companies Commission of Malaysia personal information about the business owners of the LLP and their details, including their address. To some people, this is an invasion of their privacy. Should they be subjected to lawsuits, the court can issue an order to the holder of their records to disclose this so they can be located.
Some Implications of the Risks of LLP Business
What does it mean with all these risks of limited liability partnerships? What do you have to do about these as a businessperson? After identifying all the risks, you have to eliminate or lessen the effect it has on the company. You must brainstorm some contingency plan ideas and put them into a Risk Management System.
The Risk Management Plan would include the objectives, materials, and people involved. Aldo, it includes the steps the company has to carry out to minimize these risks in the LLP business.
Do you want to start up your own LLP business now? We, at the 3E Accounting services for Limited Liability Partnership, would like to help you with your Limited Liability Partnership Setup.