Partnerships in Malaysia

There are many types of business entities which exist in Malaysia. Among these are the
sole proprietorship, partnership, private limited company, and limited liability company,
among others. This article will discuss the partnership, the details of one, and the
advantages and disadvantages of owning one in Malaysia.

Definition of a Partnership
A partnership is one of the primary business entities in Malaysia. In a partnership, there are
at least two partners or owners and a maximum of 20 owners. It can be established on a
small scale, making it a viable option for start-ups. Those who know that their business is to
be owned and operated by more than one individual should consider selecting the
partnership as their business structure of choice. There are two varieties of partnership in
Malaysia. These are the partnership and limited liability partnership respectively. In a
partnership, the partners jointly manage the company. They also will have joint
responsibility for the partnership’s debts and other liabilities. The owners of the company
have unlimited liability. In Malaysia, partnerships have certain similarities with sole
proprietorships. However, there are two key differences between partnerships and sole
proprietorships. The first and most important is, of course, the minimum number of owners.
A partnership requires at least two; a sole proprietorship, just one. Partnerships are also
governed by Malaysia’s Partnership Act of 1961. As is implied by its name, this act only
pertains to partnerships; therefore, sole proprietorships are unaffected by this important
piece of legislation.
A limited liability partnership is a partnership which includes elements that exist in both a
partnership and a company. In a sense, a limited liability partnership is a hybrid of the two.
In a limited liability partnership, the partners who own the company have limited liability
related to the financial losses of the company. Most people who select this type of business
entity own a small-scale business. Much like sole proprietorships, limited liability
partnerships are therefore commonly owned by those who own small and medium
enterprises (SMEs).

In Malaysia, the business profits of partnerships are taxed at the individual personal tax rate
of each partner involved. Therefore, a partnership does not pay taxes on its business
income but instead moves the tax burden to the individual partners. For this reason, tax
planning opportunities for those who own a partnership are somewhat limited.

Due to the fact that tax planning for a partnership may sometimes be difficult, you may need
the services of experts. This is where we at Paul Hype Page & Co can come in. Our
knowledgeable and experienced tax team will provide the best tax advice possible for your
partnership. We will see to it that you receive tax planning suggestions which will help your
partnership thrive.

Advantages of Starting a Partnership in

Malaysia
Establishing a partnership in Malaysia allows its owners to benefit from several advantages.
One of these advantages is the fact that owners are able to collaborate to generate more
effective business ideas. Highly skilled employees can also be made partners, thus leading
to better ideas and more revenue being generated.

From a financial perspective, a partnership is relatively easy to establish and start-up costs
are low. Input from multiple owners also assures that more capital is available for business
operations. Therefore, the owners will have greater borrowing capacity when compared to
the owner of a sole proprietorship. Partnership owners might also benefit from income
splitting, which is an advantage that may even bring about significant tax savings.

Partnerships also have several legal advantages. In a partnership, all of the partners’
business affairs reman private and external regulation is reduced. Furthermore, it is also
relatively easy to change the business structure if circumstances demand that such be the
case.

Having read about the potential advantages brought about by a partnership, you might have
become interested in starting a partnership of your own in Malaysia. If such is the case, or if
you would like to start any other business entity in Malaysia, we at Paul Hype Page & Co
will contribute our best input. We will take you through the entire process of incorporation.
We will see to it that your company in Malaysia is set up in as simple and smooth a manner
as possible.

Disadvantages of Starting a Partnership in

Malaysia
Of course, there are also certain disadvantages connected to establishing a partnership in
Malaysia. Perhaps the most important of these disadvantages lies in the fact that if the
partnership is not a limited liability partnership, the liability of the partners for the debts of
the business is unlimited. Furthermore, each partner is fully liable for the debts of the
partnership. This means that each partner is liable for their share of the partnership debts
as well as all the debts which have been amassed by the company.

From an interpersonal perspective, partnerships are often tenuous. This is because the
nature of partnerships means that there will always be a risk of disagreement and friction
between partners and management. If the partners are unable to get along with one
another, it could lead to problems for the partnership. Another related disadvantage relates
to the fact that each partner is an agent of the partnership. This means that each partner is
liable for actions taken by other partners. Thus, even if one partner has not made any
mistakes, this partner may be made to suffer through the errant actions of other partners.

How Partnerships in Malaysia Can Be

Ended
Partnership laws are not the same around the world; each country has its own laws
regarding partnerships, including Malaysia. However, in many countries, should there not
 be a presence of an agreement to the contrary, a partnership can be dissolved for any of
the following reasons:
 death, resignation, withdrawal, expulsion, or retirement of a partner; in some countries, a
partnership does not automatically end with the death or withdrawal of a partner, as an
opportunity to buy out that partner’s portion of the partnership will be granted to other
partners
 physical or mental incapacitation of a partner
 filing for bankruptcy by the partnership business
 mutually-agreed dissolution of the partnership
 partnership business is found to be illegal
 court order is issued stating that the partnership must be terminated; such may be the case
when the partnership can no longer achieve one or more of its economic objectives
 one or more partners have made it impossible or extremely difficult to maintain the business
operations of the partnership business
one partner buys out all of the other partners; should such be the case, the partnership will
have come to an end, but the business itself will continue to exist in the form of a sole
proprietorship
In Malaysia, dissolution of partnerships is governed by Section 37 of the Partnership Act.
This section allows a partner to ask the court for an order to dissolve the partnership if the
partner considers another partner’s actions to have been willfully and deliberately harming
the best interests of the partnership.
A good practice is for the partners to decide in advance what course of action will be taken
in the event that one or more partners dies or withdraws. One way in which this can be
done is by entering into one of various agreement related to buyouts. Such agreements are
sometimes included as part of the partnership agreement, but they may also be found in the
form of a separate agreement.

So I recently incorporated mr-stingy as a Limited Liability Partnership

(LLP) in my home country of Malaysia.

I looked for information online before I started, but couldn’t find

anything comprehensive. So for the benefit of everyone who’s interested
to start their own company, I decided to write this guide. Here’s
everything I know about starting an LLP.
 WHY A LIMITED LIABILITY PARTNERSHIP?
If you haven’t heard of an LLP before, it’s a new business model — the
love child between a traditional private limited (Sendirian
Berhad) company and a partnership. An LLP offers benefits of a private
limited company without its painful reporting requirements.
Private limited companies are great, but they cost a lot, especially for
small business owners. Search online, and you’ll find companies
offering to help set up a private limited company for about RM 1,500.
And it costs at least RM 2,500 per year to maintain (for mandatory
expenses like secretary fees, auditor fees and accounting fees).

On the other hand, you can set up an LLP for the price below:

 Company name reservation: RM 30 (Update 14th Dec 2015: Company

name reservation is not mandatory)
 Registration fees: RM 500
 Certificate fees: RM 21.20, including GST (Update 14th Dec 2015: This
used to cost RM 47.70. Details in Step 14 below)
(The RM 500 registration fees don’t include your LLP certificate. As to
why someone would register a company without wanting a certificate
beats me, but anyway…)
 Total: RM 521.20
And it’ll cost you this much to maintain it yearly:

 Annual declaration: RM 200

It’s a lot cheaper because you don’t need to do things like have an
Annual General Meeting, hire a company secretary, and submit audited
financial reports.

But why not form a sole proprietorship or partnership instead? They cost
much cheaper. Only RM 60 per year to start and maintain (RM 30 if
you’re not creative and use your own name).
Because an LLP is a separate legal entity from its partners. It declares its
tax separately from its partners (important, because it can help optimize
the tax you pay). And then the most important point of all: like a private
limited company, an LLP offers limited liability to its partners.

Meaning even if the LLP is sued and goes bankrupt one day,
creditors cannotcome after your personal assets. But in a conventional
sole proprietorship or partnership — they can and they will.

WHY NOT?
Like many things in Malaysia — the idea behind LLPs is good. But the
implementation hasn’t gone so well.

Most people only know the traditional business models like sole
proprietorship and private limited, so getting things done can be a pain.

Prime Example: I went to buy a car for my LLP recently and the officers
at the Road Transportation Department (Jabatan Pengangkutan
Jalan) didn’t know how to do the vehicle transfer. They had never heard
of an LLP before. I had to have several discussions and trips to the JPJ
office before I could finally get it done.
But anyway, that’s partly why I’m here. To try new things, rough it out,
and write about my experiences — hopefully it’ll make some other
person’s journey a smoother one.

So here’s how you start a Limited Liability Partnership in Malaysia.

1. REGISTER ON THE MYLLP SYSTEM

Start by creating an account on the MyLLP system by going to their
website here.
*Update 14th Dec 2015 — SSM has upgraded to MyLLP 2.0 so a lot of
the screens you’ll see will be different from my screenshots below.
MyLLP Login Screen
Click on the “Sign Up” button beside “I am new to MyLLP”. Then enter
your identification number (can be IC, Army or Police) and details.

Important: For “User Type,” make sure you select “Verified User”
(instead of General User), otherwise you won’t be able to continue with
the LLP registration.
Once you’ve successfully registered on the system, they’ll email you
something that looks like this:
Print a copy. You’ll need it for your visit to the Companies Commission
of Malaysia (Suruhanjaya Syarikat Malaysia, SSM) office.

2. MAKE YOUR WAY TO YOUR NEAREST SSM

OFFICE
You can find a full list of SSM offices here.
The most convenient one for me is the head office at Menara SSM:

Menara SSM@Sentral
No 7, Jalan Stesen Sentral 5
Kuala Lumpur Sentral, 50623 Kuala Lumpur
Operating Hours: 8:15 AM – 5 :15 PM
It’s about five minutes’ walk from the KL Sentral LRT station:
There are pedestrian walkways all the way from KL Sentral to Menara SSM. Walk “through”
Sooka Sentral to get there
It’s a tall, “glass” building, but you see this at ground floor
You don’t need to register at the main counter on the ground floor. Just
grab the lift and head to Level 17 for LLP matters.

3. TAKE YOUR NUMBER AND WAIT FOR YOUR TURN

In my experience the staff at Menara SSM are efficient. I’ve never had
to wait more than half an hour. And usually my number gets called
within ten minutes.

Pass the email you printed in Step 1 (and your IC) to the friendly person
at the counter. She will verify your registration and then give you your
Login ID and Password.
4. LOGIN TO THE MYLLP SYSTEM & RESERVE YOUR
LLP NAME
*Update 26th Sept 2015 — One of my readers (Thanks Jason!) just told
me that Steps 4 & 5 are not mandatory. Meaning you can actually go
straight to Step 6. I recommend you do it — it’ll save you RM 30!
At Menara SSM, there’s a bunch of computers already hooked up to the
MyLLP system. Login to the system using your newly obtained Login
ID and Password.

Don’t ask me who the girl is. I didn’t say Hi

(You could probably do this at home too, but since I was already there
— I used the computers provided.)
Click on “Name Registration” and check if anyone else already has your
company name. If not, reserve the name and make the RM 30 payment. I
used the credit card option to pay.

(The verification and payment steps are identical to the ones in Step 7
and below, so I decided not to include them here)

5. LOGOUT, GO HOME AND WAIT

I initially thought that I could complete the registration in one day.

But after paying to reserve the LLP name, I couldn’t find the next step.
There was no “Proceed to Registration” button.
Confused, I went to the counter to ask for help.

“You have to wait for three working days,” the lady at the counter said,
“and then you can do the registration online.”

6. LOGIN TO MYLLP AND REGISTER

So I waited a few days. Kept logging in to see the status, but it kept
saying “Pending Payment”.

The strange thing was the system never emailed me or sent me an alert
saying my name reservation was complete. Remember what I said about
good ideas, but poor implementation?

*Update 26th Sept 2015 — It seems like this is a common problem if you
use SSM’s computers to do the payment in Step 4. My girlfriend used
her personal computer for Step 4, and she immediately got approval to
proceed.
This is what I recommend now: Skip Steps 4 and 5. And use your own
computer to do everything.
Anyway, after a week I couldn’t wait any longer so I decided to try
anyway.

I logged back into MyLLP and clicked on “LLP Registration” >>

“General Registration”

Then I entered my “Proposed Name” and hit “Search”. (The same name
I reserved in Step 4).
Finally getting somewhere!
This time, there was a line in green saying “Please proceed to
reservation”.

Click on “Proceed”.

7. CLARIFY YOUR LLP NAME

The next screen is to clarify your LLP name — if the name is unclear or
if it’s not in English / Bahasa Malaysia.
It also allows you to add details of an authorization letter. For example,
if you use a name that needs permission from a professional body
(accountants, lawyers, secretaries).

Leave this blank and click on “Proceed to LLP Registration” if you’re

just registering a simple LLP like me.

8. ENTER YOUR LLP DETAILS

The first tab consists of basic information about your business:
partnership agreement, address, and nature of business.
And yes, for you solopreneurs — you can use your home address.

Basic LLP Information

9. ENTER COMPLIANCE OFFICER DETAILS

 If you’re a solopreneur, this means you

10. ADD YOUR PARTNER(S) INFORMATION

An LLP needs to have at least two partners…
 But the total number of partners is unlimited!

11. ENTER YOUR BUSINESS CODE(S)

Business codes are numbers which help SSM classify what kind of
business you’re involved in.

You can search for business codes directly on the MyLLP system by
keying in keywords. Or find the complete list here.
Choose up to three Business Codes
The closest thing I could find for a blog was “Web Portals”.

Once you’re done, declare that you aren’t lying, and click “Pay and
Submit”.

12. MAKE PAYMENT

It costs RM 500 to register an LLP. You can pay either via credit card or
online fund transfer:
 Success!

13. CHECK YOUR EMAIL

Once you’ve successfully made payment, Mr. LLP Administrator will
send you two emails. The first tells you that you’re now RM 500 poorer.
The second is the one below:
 Congratulations, you’re now the proud owner of a company!

14. GO BACK TO SSM FOR YOUR CERTIFICATES

So you’re now the proud joint-owner of a Limited Liability Partnership.
Except that you have no proof — other than Mr. LLP Administrator’s
email. How will you do things that a company needs to do — like
opening a bank account and buying assets?

Right — you’re gonna need your company certificates. But they’re not
going to be automatically sent to you. You have to specifically request
for them at SSM.

Go back to Level 17, and look for the form below:

 Used to cost RM 45. Now RM 47.70. Thanks
GST!
Take a number, submit the completed form, and make payment (cash
only) at the counter.

It’ll take three working days to process. So you’ll have to come back…
again!

*Update 14th Dec 2015 — You can now purchase a Certificate of

Registration (CN5877) directly on the new MyLLP system. It costs only
RM 21.20. And saves you a trip to SSM. Basically point number 14
above is no longer valid.
It looks like this:
The new MyLLP looks way better!

15. VISIT YOUR FRIENDS AT SSM 3 WORKING DAYS

LATER
Since you’ve spent so much time at SSM, you’ve probably already made
some friends there. Go back and pay them a visit.

Take a number, wait for your turn, and collect your certificates at the
counter. It should take less than five minutes once it’s your turn. Like I
said before, Menara SSM staff are really efficient.
 And then you can give everyone a goodbye hug. Because you’re finally
done!

FINAL THOUGHTS
So after RM 577.70 and multiple visits to Menara SSM, I finally got
everything done. Overall, it was a good experience. The staff at Menara
SSM were courteous and professional. The MyLLP system worked OK
too. Just a few points for improvement — which I’ll send to SSM:

 There’s no notification once your Name Reservation is successful.

 You have to separately apply for LLP certificates. (Do people really start
companies without wanting the certificates?)
 The whole process seems disjointed — half online, and half over-the-
counter transactions. Would be good if it was fully online.
 There’s little documentation on how the process really goes. There’s a
lot forms and FAQs online, but no flowcharts showing the full process
and timelines. How does the man on the street actually know what to
do?
*Update 14th Dec 2015 — SSM has recently upgraded the MyLLP
website. I haven’t tested it in detail yet, but it looks like some problems
above have been fixed. And my very helpful readers have been
commenting below on the new changes. Thanks guys! Please keep the
info coming.
Finally, if you’re thinking it’s such a hassle to go through the whole
process — there are companies that will do everything for you. It’ll just
cost you a bit more.

And if you’ve made it this far — you’re probably interested in setting up

your own company too. Let me know if you have any questions. I wish
you the very best.

For further information: SSM

Picture from Pexels