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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:-

By an individual operating as Sole Proprietor
By two or more (but not more than 20) persons in Partnership, or
By two or more persons in Limited Liability Partnership, or
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 1 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 file annual return and financial statements every calendar year.	Must lodge an annual declaration and solvency statement with CCM (the 1^st 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/ Unaudited Financial Statement	Annual Declaration
Annual Fee to SSM	RM200	RM200	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 – 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.