Understanding Limited Partnership (LP)

Limited Partnership (LP)A Limited Partnership (LP) is a business structure in Malaysia that includes at least one general partner and one limited partner. This type of partnership is regulated under the Limited Partnerships Act 2012. It is designed to offer flexibility while balancing liability and operational responsibilities among partners.

Unlike a traditional partnership, an LP distinguishes between general and limited partners. General partners manage the business and are fully liable for its debts and obligations. In contrast, limited partners have liability restricted to their capital contribution, but they are not involved in daily operations.

 

Key Features of a Limited Partnership

  • Two Types of Partners: The LP structure requires at least one general partner who oversees the business and one limited partner who provides financial backing.
  • Limited Liability for Limited Partners: Limited partners are only liable up to the amount they contribute to the partnership.
  • General Partners’ Full Liability: General partners are responsible for the business’s debts and obligations, ensuring the entity remains operationally functional.

 

Registering an LP in Malaysia

To establish an LP, businesses must register with the Companies Commission of Malaysia (SSM). This involves submitting details about the partnership, including the roles of general and limited partners. Registration provides the legal framework to operate the business under the LP structure.

 

Benefits of a Limited Partnership

  • Investment Opportunities: Limited partners can invest in the business without taking on operational responsibilities, making it an attractive option for financial backers.
  • Liability Protection: Limited partners enjoy protection from personal liability, which is capped at their contribution to the partnership.
  • Operational Focus: General partners can focus on managing the business without interference from limited partners.

 

Limitations to Consider

  • General Partners’ Risk: General partners bear full liability, which can be a significant risk if the business incurs debt.
  • Limited Decision-Making for Limited Partners: Limited partners are restricted from participating in day-to-day operations, which may not suit all investors.

 

Why Choose a Limited Partnership?

An LP is ideal for businesses looking to attract investors who prefer minimal involvement in operations. It provides a clear division of roles and liabilities, making it a practical choice for enterprises needing both managerial expertise and financial backing. With proper registration and adherence to regulations, an LP can offer a balanced structure for business growth in Malaysia.