Setting Up Limited Liability Partnership (LLP)


1) What is a Limited Liability Partnership (LLP)?
  • LLP is an alternative business vehicle offering a hybrid of characteristics between conventional partnership and a Company.
2) Why LLP in Malaysia?
  • To provide the business community with an alternative business vehicle to complement the traditional choices of sole proprietorships, partnerships and Companies (local and foreign).
  • To provide access to limited liability status for partnership type businesses.
  • More affordable business vehicle.
3) Who can be the partners in LLP?

Individuals (natural persons) or bodies corporate or combination of both.

4) What is the difference between a LLP and a General Partnership?

The LLP offers limited liability to its partners whereby any debts and obligations of the LLP will be borne by the assets of the LLP.

In the case of a conventional partnership, the partners has unlimited liabilities.

5) What is the difference between an LLP and a Company?

There are many fundamental differences between an LLP and a company. Amongst others, the differences are:-

  • No issuance of shares
  • Flexibility in making decisions
  • No formal requirement for Annual General Meetings
  • No requirement to submit financial statements to SSM
  • Accounts need not be audited.
6) What type of organisations are likely to be users or beneficiaries of LLP?
  • Small businesses (Start Ups)
  • Professionals Groups (e.g. Lawyers, Accountants or Company Secretaries)
  • Joint ventures
  • Venture capitals
7) What is the legal status of a LLP?

A LLP is a separate entity with the legal status of a body corporate.

8) Why would one choose to register a LLP?

LLP provides the limited liability status as compared to registering a business which exposes the owner to unlimited liability. LLP is subject to less stringent compliance requirement.

9) Is there any restriction as to what kind of business can use LLP as a business vehicle?

No. It is for all kind of lawful businesses with a view to make profit.

10) Can a charity organisation register as LLP?

No. LLP is intended only for businesses with a view to make profit.

11) Can the registration of a LLP be rejected?

Yes. On grounds where the registrar is satisfied that:-

(a) the registration of the LLP would be contrary to the national security or interests; or
(b) the proposed business is likely to be used for :

  • a charitable purpose;
  • an unlawful purpose; or
  • purposes prejudicial to public peace, welfare or good order or morality in Malaysia.
12) Is there any need for a partnership agreement?

Yes. However, in the absence of agreement as to any matter set out in the Second Schedule of the LLP Act 2012, provision of the Second Schedule relating to that matter shall apply.

13) Can two companies form LLP?

Yes. These are the most common form of joint ventures.

14) How long will SSM take to process the registration application?

A notice of registration will be issued immediately upon submission of the application through MyLLP system provided all registration requirements are satisfied.

15) Is there any requirement for a minimum number of partners to have principal or only place of residence in Malaysia?

No. The requirement to be ordinarily residing in Malaysia is applicable only when a partner is also acting as the compliance officer of the LLP.

16) Will the partners of the LLP be held personally liable for the debts incurred by the LLP?

No. It is the LLP that will be liable. However, a partner will be jointly and severally liable for his own wrongful act or omission in the course of the business of the LLP. The LLP however is not bound by what the partner has done in dealing with a person if:-

  • the partner acted without authority; or
  • the person with whom the partner was dealing knows that the partner acted without authority or does not know that he is a partner of the LLP.
17) Under the LLP Act 2012 there is a requirement for a LLP to appoint at least one compliance officer. What are the requirements for a person to be appointed as a compliance officer of a LLP?

The Compliance Officer has to be either from amongst the partners of the LLP or a person qualified to act as a secretary under the Companies Act 2016 who:-
(a) is a citizen or permanent resident of Malaysia; and
(b) ordinarily resides in Malaysia.

18) What are the responsibilities and liabilities of a Compliance Officer?

The main responsibilities of a Compliance Officer are such as:-

  • Registering any changes in registered particulars of the LLP;
  • Keeping and maintaining registers and records of the LLP; and
  • Ensuring publication of names of the LLP in accordance with the provisions of the Act.

A compliance officer is personally liable to all penalties including administrative penalty imposed on the LLP unless if he can prove that he is not liable.

19) Can there be more than one Compliance Officer?


20) If the LLP has two partners and one of them ceased to be a partner for any reason, is the remaining partner required to appoint another partner? Is there any time frame to do so?

Yes. The remaining partner is required to appoint another partner within six months or a longer period which may be determined by the Registrar (which shall not exceed one year) upon an application made by the remaining partner.

21) Can a partner who is declared a bankrupt continue to act as a partner?

Yes, a partner who is declared a bankrupt can continue to be a partner of an LLP. However, he is prohibited from taking part in the management of the LLP unless he has obtained leave from:-

  • The Director General of Insolvency(DGI); or
  • The court provided that a notice of intention to apply for leave has been served on the DGI and the DGI is heard on the application.
22) Can an existing business vehicle such as a Company or a partnership firm convert into a LLP?

Yes. In the case of a Company, only a Private Company incorporated under the Companies Act 2016 is allowed. In the case of a partnership, only firms which are registered under the Registration of Business Act 1956 or any firms carrying on professional practices are allowed.

23) What will be the position of a Private Company which converts to a LLP?

After a conversion, the Private Company shall be deemed to have been dissolved.

24) Can a sole-proprietorship convert into LLP?

A sole proprietorship cannot convert into a LLP as it only has 1 member. The sole proprietor must find at least one more person to be a partner before he can register a LLP.

25) Is there a requirement for a converted LLP to notify its conversion to any party which the LLP was dealing with prior to the conversion?

A converted LLP is required to ensure for a period of twelve months commencing fourteen days after the date of registration to state the following on every invoice or correspondence:-

  • A statement that it was, as from the date of registration, converted from a conventional partnership or Private Company, as the case may be, to a limited liability partnership; and
  • The name and registration number, if applicable, of the conventional partnership or Private Company from which it was converted.
26) Can a LLP re-convert to a private company?

No. The LLP will have to be voluntarily wound up first and then incorporate as a new Company.

27) It is unfair to creditors as the current partnerships can evade liability by just converting to LLP. What is the rationale/remedy for this?

Under the LLP Act 2012, it is provided that all rights and liabilities are vested into the LLP upon conversion from a conventional partnership or a Private Company. Further, partners of a conventional partnership that has converted to a LLP shall continue to be personally liable, jointly and severally with the LLP for the liabilities and obligations incurred prior to the conversion. Under the LLP legal framework, creditors of a private company are further protected as the Company must get the agreement of the creditors for such conversion.

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