What is a Limited Liability Partnership (LLP)?
An LLP is an alternative form of business that offers hybrid characteristics between a conventional partnership and a company. Among the special features of an LLP is that it is similar to a conventional partnership in terms of flexibility in its administration and similar to a company in terms of limited liability on its partners.
What is the legal status of an LLP?
In legal terms, an LLP is a corporate body. An LLP is a separate entity with the legal status of a corporate body.
Why are LLPs introduced in Malaysia?
LLPs are introduced in Malaysia because:
What types of organisations might be users or beneficiaries of LLPs?
Several types of organisations may be users or beneficiaries of LLPs, including:
Can charitable organisations register as LLPs?
No. LLPs are for carrying on business to make a profit only.
Can a foreign LLP conduct business in Malaysia?
A foreign LLP can conduct business in Malaysia by registering with SSM and submitting the following documents:
Can an LLP own assets/property under the LLP name like a company?
Yes. An LLP as a separate legal entity can own assets/property in the same way as a company.
However, at this time LLPs are still unable to apply to register land/property with the Land Office as the Land Office is in the process of finalising the procedures and conditions regarding applications to register land/property by LLPs.
What is the difference between an LLP and an ordinary partnership?
An LLP offers limited liability to its partners where any debts and obligations of the LLP will be fully borne by the assets of the LLP.
In the case of a conventional partnership, the partners have joint and several liability with the partnership firm.
What is the difference between an LLP and a company?
There are many clear differences between LLPs and companies. Among others, the differences are:
Why should someone choose to register as an LLP and not register as a business or incorporate a company?
LLPs provide flexibility in terms of internal management of an organisation which is subject to the agreement between the partners whereas companies are subject to more stringent compliance requirements contained in the Companies Act 1965.
Are there any restrictions regarding the types of companies/businesses that can use LLPs as a form of business?
No. LLPs can be used for all types of legally valid businesses for the purpose of making a profit.
Does an LLP need to hold an annual general meeting?
LLPs do not need to hold an annual general meeting.
How to register an LLP?
LLPs can be registered through an application made to the LLP Registrar by submitting the following information to SSM:
An LLP is required to be registered by the LLP Compliance Officer on behalf of the partners and the Compliance Officer can do so by subscribing to the MyLLP system.
Can an LLP registration be rejected or not accepted? If so, on what grounds?
LLP registration may be rejected if the Registrar is satisfied that:
How long does it take SSM to process a registration application?
A registration notice will be issued immediately after the submission of the application through the MyLLP system provided that all registration requirements are met.
Is there a limit to the number of partners in an LLP?
LLPs must have a minimum of 2 partners and there is no maximum limit for the number of partners.
Who can be a partner in an LLP?
Individuals (natural persons) or corporate bodies whether wholly or partly of the LLP.
Is there a need for a partnership agreement?
Yes. However, in the absence of an agreement on any matter specified in the Second Schedule of the LLP Act 2012, the provisions in the Second Schedule relating to that matter will apply automatically.
Is it necessary for every partner to be a “resident” in Malaysia?
There is no requirement for partners to be residents in Malaysia but there is a requirement for the compliance officer to be a citizen or resident of Malaysia.
Will LLP partners be personally liable for debts incurred by the LLP?
No. The LLP will be fully liable for its debts and obligations. However, partners will be jointly and severally liable for their own wrongful acts or omissions in carrying on the business of the LLP.
However, the LLP is not bound by what is done by a partner in dealing with a person if:
If an LLP has two partners and one of them ceases to be a partner for any reason, does the remaining partner need to appoint another partner? Is there a timeframe to do so?
Yes. The remaining partner must appoint another partner within six months or such longer period as may be determined by the Registrar upon application by the existing partner and the extended period given should not exceed one year.
Can a partner who is declared bankrupt continue to be a partner?
A partner who is declared bankrupt may continue to be a partner. However, he is prohibited from taking part in the management of the LLP unless he has obtained permission from:
What are the requirements for a person to be appointed as an LLP compliance officer?
The compliance officer must be one of the partners or a person qualified to act as a secretary under the Companies Act 1965 who is:
What are the responsibilities and liabilities of a compliance officer?
The main responsibilities of a compliance officer are:
The compliance officer is personally liable for all penalties including administrative penalties imposed on the LLP unless he can prove that he was not responsible.
Can there be more than one compliance officer?
Yes, there can be.
Can existing business forms such as companies or partnership firms convert to LLPs?
Yes, they can. In the case of a company, only private companies incorporated under the Companies Act 1965 are allowed. In the case of a partnership, only firms registered under the Registration of Businesses Act 1956 or any firm carrying on professional practice are allowed.
Can two companies form an LLP?
Yes, they can. This is a common form of joint venture.
How to convert a private company to an LLP?
A private company may apply to convert to an LLP by submitting to the Registrar a statement signed by all the shareholders containing the following particulars:
How to convert a conventional partnership firm to an LLP?
A conventional partnership may apply to convert to an LLP by submitting to the Registrar a statement signed by all its partners containing the following particulars:
What is the status of a private company that converts to an LLP?
The status of the private company shall be deemed to have been dissolved.
Can an LLP be converted back to a private company?
No. The LLP must first go through voluntary winding up and then incorporate a new company.
Are the existing legal provisions unfair to creditors because existing partners can avoid liability by simply converting to an LLP?
Under the LLP Act 2012, it is provided that all rights and liabilities will be transferred to the LLP after conversion from a private company or conventional partnership.
Even the partners of a conventional partnership that has converted to an LLP shall continue to be personally, jointly and severally liable with the LLP for liabilities and obligations incurred before the conversion.
Under the legal provisions, the rights of creditors are also protected as the consent of the creditors is required before a conversion can be made.
Can a sole proprietor convert to an LLP?
A sole proprietor cannot convert to an LLP because it has only 1 owner. The sole proprietor needs to obtain at least one more partner before he can register as an LLP.
Is it necessary for a converted LLP to notify the conversion to any parties it has dealt with before the conversion?
A limited liability partnership that has been converted from a conventional partnership or private company shall ensure that for a period of twelve months beginning from fourteen days after the date of registration of the conversion, every invoice or official correspondence of the limited liability partnership bears the following:
Who are considered professionals under the LLP Act 2012?
Under the First Schedule of the LLP Act 2012, the following groups are defined as professionals:
Can two different professionals (e.g., a lawyer and an accountant) be partners of one LLP?
No. An LLP established for the purpose of carrying on professional practice shall consist of natural persons practicing the same profession only.
This is to ensure that issues of integrity and ethics can be observed.
The LLP Act 2012 requires professionals to obtain a letter of approval from their respective regulatory bodies before an LLP is formed for professional practice. Does this requirement apply to foreign professionals who intend to form an LLP in Malaysia?
The LLP Act 2012 does not prohibit foreign professionals from practicing in Malaysia. However, this is subject to the conditions and approvals of the relevant regulatory bodies in accordance with the laws governing such professionals in Malaysia.
How can an LLP be dissolved?
An LLP can be dissolved through:
Under what circumstances can an LLP be wound up by the Court?
An LLP may be wound up by the court under the same circumstances as a Company is wound up by the court as provided for under the Companies Act 1965.
The LLP Act 2012 provides that the provisions in the Companies Act 1965 relating to winding up by the Court shall apply to LLPs.
How can an LLP be dissolved by voluntary winding up?
If an LLP has ceased operations and has settled all its debts and liabilities, a partner of the LLP may apply to the Registrar for the voluntary winding up of the LLP provided that all the requirements under the LLP Act 2012 for an application for voluntary winding up are met.
Under what circumstances can an LLP be struck off the register?
An LLP may be struck off the register if the Registrar believes and has reasonable grounds such as the following:
Does an LLP need to maintain accounting records?
Yes. All accounting records must be kept to enable the LLP’s accounts to be prepared which give a true and fair view of the state of the LLP’s affairs. Accounting records shall be kept for a period of 7 years.
Does the preparation of accounts for an LLP need to follow approved accounting standards similar to the requirements imposed on companies under the Companies Act 1965?
One of the main objectives of introducing the LLP business form is to provide flexibility in the internal affairs of a business. Similar to a conventional partnership, the LLP legal provisions do not stipulate the requirement for the preparation of LLP accounts to be made in accordance with approved accounting standards.
However, an LLP needs to prepare from time to time accounting records that will give a true and fair view of the financial affairs of the LLP.
Is there a need for accounting audits?
There is no requirement for mandatory audits for LLPs.
Does the LLP need to submit Annual Returns?
No. However, the LLP needs to submit an Annual Declaration to the Registrar stating whether the LLP is able to pay its debts or otherwise.
What is the MyLLP portal?
The MyLLP portal is a platform created by SSM for any LLP dealings in Malaysia. Starting 19 August 2021, the new MyLLP system can be accessed via www.ssm4u.com.my.
Is there a requirement to pay a fee to subscribe as a user of the MyLLP system?
No.
How can MyLLP users purchase LLP products such as registration certificates, LLP profiles and personal involvement?
The provision of profiles, registration certificates, copies of image documents and personal involvement for Limited Liability Partnerships registered with SSM can be obtained from the XCESS Portal by visiting https://ssm4u.com.my.
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