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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
 CompanyLimited Liability Partnership (LLP)General PartnershipSole 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 approvalChoice of Trade Name subjected to ROB approval
Capital ContributionShare capitalPartners contributionPartners contributionOwn contribution
Owner(s) of the businessCompany(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)PartnersSole Proprietor
Legal StatusSeparate legal entitySeparate legal entityNot a separate legal entityNot a separate legal entity
Party that is liable for debts of the businessCompanyLLPPartnersSole Proprietor
Responsibility for management of businessBoard of DirectorsPartnersPartnersSole Proprietor
Personal liabilityNo personal liability of individual director or shareholder Liabilities borne by the directors or shareholders are to the extent of unpaid shares onlyNo 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 onlyUnlimited liability(jointly and severally liable with the partnership) which can extend to personal assets of the partnersUnlimited liabilitywhich can extend to personal assets of the sole proprietor
No. Of Shareholders/PartnersMinimum 1 and maximum 50 in private companyMinimum 2 and no maximum limit2 to 20 partners(Except for partnerships for professional practice with no maximum limit)Sole proprietor only
Company Secretary / Compliance officerQualified Company SecretaryCompliance Officer or partner of the LLPN/AN/A
Statutory Audit RequirementRequired to be AuditNo compulsory unless it is provided in the partnership agreementNo Audit requiredNo Audit required
Annual ComplianceMust file annual return and financial statements every calendar year.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 SSMAnnual Return with Audited/ Unaudited Financial StatementAnnual Declaration  
Annual Fee to SSMRM200RM200Trade Name – RM60 per year
Personal Name – RM30 per year
Trade Name – RM60 per year
Personal Name – RM30 per year
Income Tax Status / Income Tax RateTax 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 & RegulationsCompany Act 1965 (CA),Limited Liability partnership Act 2012 (LLP), Limited Liability Partnership Regulations 2012Registration 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
– one local resident director 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.

 
In conclusion, a private company (Sdn Bhd) is preferred over business entities with the enforcement of the new Companies Act 2016 which allows for incorporation by sole director and shareholder and at the same time offers limited liability feature.

As for LLP, this entity requires minimum 2 partners for registration and appointment of compliance officer who will be personally liable for all acts of LLP is mandatory. You may also refer to Key Issues And Ambiguities Faced By Limited Liability Partnership (LLP) for other disadvantages.

In term of compliance costs which will be slightly higher for a private company (Sdn Bhd), it will be easier to obtain loan under a company compared to any other business entities.