A Limited Liability Partnership (LLP) is a legal person in the eyes of the law.

Limited Liability
Partnership (LLP) is an alternative business vehicle regulated under the Limited Liability
Partnerships Act 2012 which combines the characteristics of a company and a conventional
partnership. LLP is a partnership in which some or all partners depending on the jurisdiction
have limited liabilities. It therefore can exhibit elements of partnerships and corporations. In
an LLP, each partner is not responsible or liable for another partner's misconduct or
negligence. According to S.26 of the Act, every partner is an agent of the LLP for the purpose of
the business of the entity. However, he is not an agent of other partners. Further, the liability of
each partner is limited to his agreed contribution in the Limited Liability Partnership. It provides
liability protection to its partners. The members of an LLP act as its agents and only have
liability up to the amount they have contributed to the LLP in particular their capital
contribution and undrawn profits. This is a significant advantage over a traditional
partnership where the partners generally have unlimited liability. However, there are
certain circumstances in which the personal liability of a Member may be extended. These
include:

Negligence - if a Member is negligent and a third party suffers loss as a result then the third
party could try to take action against that individual Member as well as the LLP. However,
any such action would undermine the principle of limited liability and the Courts are
generally reluctant to find individual Members liable for their own negligence.

Wrongful/Fraudulent Trading - wrongful and fraudulent trading provisions apply to LLPs in

substantially the same way that they apply to limited companies. If the Members of an LLP
(a) allowed the LLP to continue trading after they knew (or ought to have known) that it had
no reasonable prospect of avoiding insolvency; or (b) allowed it to continue trading with a
view to defrauding creditors, they may be personally liable. The degree to which each
Member was involved and the degree of control in the business will both be relevant.

The penalties are potentially unlimited and any individual may be ordered to make such
contribution "as the Court thinks proper".

Insolvency Clawbacks – provisions relating exclusively to LLPs allow for a clawback of any
"withdrawals" (including drawings, loan repayments and property distributions) by a
Member during the two years prior to an LLP becoming insolvent. Again, the Court has
discretion in this area.

Personal Guarantees - anyone lending money to an LLP may still require personal
guarantees from the Members, as they frequently do with directors/shareholders of a
company. Members should check the provisions of their members’ agreement to see if the
LLP gives an indemnity to its Members for such a guarantee or that the liability will be
shared with the other members.

However, conventional partnership is defined as a partnership registered under the

Registration of Businesses Act 1956 [Act 197] and a partnership established by two or more
persons for the purposes of carrying on any professional practice. The differences between
LLP and conventional partnership are the ownership of LLP is 2 or more individual whereas
conventional partnership has a number of 2 to 20 more partners except for partnerships for
professional practice with no maximum limit when it comes to ownership. The words ended
at the end of the name registered for LLP is “PLT” known as Perkongsian Liabiliti Terhad
while conventional partnership has no specific word. LLP is a separate legal entity while
conventional partnership is not a separate legal entity. The party responsible for debts of
the business for LLP is LLP itself while conventional partnership is by the partners. There’s
no personal liability of partner for LLP 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. Based on conventional partnership, unlimited liability is
jointly and severally liable with the partnership which can extend to personal assets of the
partners. The rules and regulations for LLP is stated in Limited Liability Partnership Act 2012
(LLP), Limited Liability Partnership Regulations 2012 and for conventional partnership is
stated in the Registration of Business Act (1956).