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Sole Proprietor vs LLP vs General Partnership vs Company in Malaysia

Types of Business Entities

The following are the common forms of business organization in Malaysia:-

  1. By an individual operating as Sole Proprietor
  2. By two or more (but not more than 20) persons in Partnership, or
  3. By two or more persons in Limited Liability Partnership, or
  4. By a locally incorporated Company or by a Foreign Company registered under the provisions of the Company Act 1965
  Company Limited Liability Partnership (LLP) General Partnership Sole Proprietorship
Entity Name
Appearances
Company name ended with the word “Sdn Bhd” or “Bhd” Company name ended with the word “PLT” (Perkongsian Liabiliti Terhad) Choice of Trade Name subjected to ROB approval Choice of Trade Name subjected to ROB approval
Capital Contribution Share capital Partners contribution Partners contribution Own contribution
Owner(s) of the business Company(members / shareholders own ‘shares’ in the company that give them certain rights in relation to the Company) LLP (partners have a share in the capital and profits of the LLP) Partners Sole Proprietor
Legal Status Separate legal entity Separate legal entity Not a separate legal entity Not a separate legal entity
Party that is liable for debts of the business Company LLP Partners Sole Proprietor
Responsibility for management of business Board of Directors Partners Partners Sole Proprietor
Personal liability No personal liability of individual director or shareholder Liabilities borne by the directors or shareholders are to the extent of unpaid shares only No personal liability of partner, except for own wrongful act or omission or without authority Liabilities borne by the partners are jointly and severally with the LLP to the extent of unpaid share capital only Unlimited liability(jointly and severally liable with the partnership) which can extend to personal assets of the partners Unlimited liabilitywhich can extend to personal assets of the sole proprietor
No. Of Shareholders/Partners Minimum 2 and maximum 50 in private company Minimum 2 and no maximum limit 2 to 20 partners(Except for partnerships for professional practice with no maximum limit) Sole proprietor only
Company Secretary / Compliance officer Qualified Company Secretary Compliance Officer or partner of the LLP N/A N/A
Statutory Audit Requirement Required to be Audit No compulsory unless it is provided in the partnership agreement No Audit required No Audit required
Annual Compliance Must hold an AGM every calendar year and within 15 months from the previous AGM or 6 months from the financial year end, whichever is earlier. Must lodge annual returns and audited accounts to CCM within 1 month from the date of AGM Must lodge an annual declaration and solvency statement with CCM (the 1st within 18 months from the date of registration and thereafter, 90 days from the end of the financial year)
Annual Submission to SSM Annual Return with Audited Financial Statement Annual Declaration
Annual Fee to SSM RM150-00 RM200-00 Trade Name – RM60 per year
Personal Name – RM30 per year
Trade Name – RM60 per year
Personal Name – RM30 per year
Income Tax Status / Income Tax Rate Tax on Company /
On the first 500K – 20%(SME)
After – 25%
Tax on LLP /
On the first 500K – 20%(SME)
After – 25%
Tax on Partners/
Sole Proprietor
From 0% to 26%
Tax on Partners/
Sole Proprietor
From 0% to 26%
Rules & Regulations Company Act 1965 (CA), Limited Liability partnership Act 2012 (LLP), Limited Liability Partnership Regulations 2012 Registration of Businesses Act 1956 (RBA) Registration of Businesses Act 1956 (RBA)
Advantages & Disadvantages – More paperwork & more expensive
– Limited Liability
– Complexity in Administration (statutory audit, AGM, board resolution and etc)
– Higher Compliance Cost
– 2 local resident directors are required to setup a Company
– Suitable for business affordable to maintain business with higher operation cost
– public will have access to financial affairs of the company.
– Less paperwork & additional formalities (registration is easy, fast and fewer documents are needed)
– Limited Liability,
– Simplest Administration (Not compulsory for statutory audit),
– Local resident compliance officer is required to setup LLP
– Lower Compliance Cost
– Suitable for newly start-up business with low entry cost
– Not required to disclose financial statements to the public.
– Perpetual succession :
– The changes status of the partners will not affect the existence of the LLP corporation
– Less paperwork & additional formalities (registration is easy, fast and fewer documents are needed)
– Unlimited Liability,
– Simple Administration (Not compulsory for statutory audit),
– Lower Compliance Cost
– Suitable for newly start-up business with low entry cost
– Not required to disclose financial statements to the public.
– Less paperwork & additional formalities (registration is easy, fast and fewer documents are needed)
– Unlimited Liability
– Simple Administration(Not compulsory for statutory audit),,
– Lower Compliance Cost
– Suitable for newly start-up business with low entry cost
– Not required to disclose financial statements to the public.