Registering a Partnership in Malaysia in 2023
Are you considering expanding your business to a new market?
What’s better than partnering with someone, which comes with less obligation, more flexibility, tax benefits & many more?
Well, the choice of a business type is crucial for establishing an effective business. In an emerging economy, partnership businesses draw
entrepreneurs and low-cost startups with their ease of establishment and low operational costs. A Partnership is a type of business operated by two or more people, however, not exceeding 20 individuals. Therefore, the management, liability, as well as profits are evenly divided between the owners. To be able to open a Partnership in Malaysia and to be a business owner, the person who owns the partnership must be a Malaysian national or permanent resident.
It is best suitable for those who are 2 or more business partners to test their new business model or to explore an entirely new market. The business owners could later change their company into a private limited company (Sdn. Bhd.), if they believe their business is stable or they want to expand their business.
This article provides a detailed process for registering a partnership in Malaysia. We’ll get right on it, without any further ado.
Procedure to Open a Partnership in Malaysia
To open a Limited Liability Partnership in Malaysia, you will need to follow these steps:
Step 1:- Choose a name for your LLP that should be unique and complies with the naming rules of the Companies Commission of Malaysia (SSM).
Step 2:- Obtain Digital Signature Certificates (DSC) from an authorized agency to sign the LLP registration documents.
Step 3:- Prepare and file the LLP registration papers.
Step 4:- Receive your LLP Certificate, which indicates the registration number of your LLP.
Step 5:- Pay the registration fee for establishing an LLP in Malaysia, i.e. RM500.
Step 6:- You will need to open a bank account for your LLP and deposit the minimum amount required by the bank.
Step 7:- Register your LLP for tax with the Inland Revenue Board (LHDN) to obtain a tax identification number (TIN).
Documents Needed for Registering a Partnership in Malaysia
For registering a partnership in Malaysia, the following documents are typically required:
LLP agreement: The LLP agreement outlines the ownership and duties of its members, as well as its internal management structure.
Form A: This is the registration form for the LLP, which includes details, such as the name and address of the business, the nature of the business, and the details of the partners.
Form B: This is the statutory declaration form, which declares that the information provided in Form A is true and accurate.
Digital signature certificates: Each partner in the LLP will need to obtain a digital signature certificate from an authorized agency, which will be used to sign the LLP registration documents.
Identification documents: Each partner will need to provide a copy of their identification documents, such as a passport or identity card.
Address proof: The partners will need to provide a document as proof of the registered address of the LLP. This could be a tenancy agreement or a utility bill, for example.
Payment of registration fee: The registration fee for an LLP in Malaysia is RM500, which can be paid online via the SSM e-Lodgement system.
Eligibility Criteria for Registering a Partnership in Malaysia
To open a Partnership in Malaysia, the partners must meet certain eligibility criteria, which are discussed below:
- A partnership should possess a minimum of two partners, who can be individuals or corporations.
- Each partner must be of legal age (18 years or above) and must have the capacity to enter into a contract.
- All partners must consent to the partnership and accept a partnership deal.
- The partnership must have a name, which must not be identical or similar to any existing business or company name.
- The partnership must carry out a lawful business activity, which must not contravene any laws or regulations in Malaysia.
- The partnership must have a registered office in Malaysia, which must be notified to the Companies Commission of Malaysia (SSM).
- The partnership must register for tax with the Inland Revenue Board (IRB) within 28 days of formation.
- The partnership must comply with all relevant laws and regulations in Malaysia, such as the Companies Act, Income Tax Act, and Goods and Services Tax Act.
Types of LLPs in Malaysia
In Malaysia, there are several types of LLP (Limited Liability Partnership) that can be registered, depending on the specific needs and requirements of the partners.
Here are some of the most common types of LLPs in Malaysia:
This is the most common type of LLP and is suitable for most types of businesses. All partners have equal rights and responsibilities, and the LLP is managed by the partners themselves.
This type of LLP is suitable for professionals, such as lawyers, accountants, and architects. It allows professionals to practice together in a partnership while limiting their liability.
This type of LLP is suitable for foreign companies or partnerships that wish to carry out business activities in Malaysia. It allows foreign partners to participate in the LLP, while also limiting their liability.
LLP with a Corporate Partner
This type of LLP allows a corporation to be a partner in the LLP. This can be useful for businesses that require the expertise or resources of a larger corporation.
Initial Costs to Open a Partnership in Malaysia
The initial costs to open a Partnership in Malaysia can range from RM1,000 to RM3,000, depending on several factors, such as the scope of services required and whether you engage a professional firm or company secretary to assist with the registration process.
Here are some of the costs you may need to consider while registering a Partnership in Malaysia:
- Registration fee: The registration fee for an LLP in Malaysia is RM500, which is paid to the Companies Commission of Malaysia (SSM) during the registration process.
- Professional fees: If you engage a professional firm or company secretary to assist with the registration process, you may need to pay a fee for their services. The cost of these services can vary depending on the scope of work involved and the level of experience of the firm.
- Digital signature certificate: Each partner in the LLP will need to obtain a digital signature certificate from an authorized agency, which typically costs around RM200-300 per certificate.
- Stamp duty: A stamp duty of RM10 is required for the LLP agreement.
Why register an LLP in Malaysia?
There are several reasons why you might want to register an LLP (Limited Liability Partnership) in Malaysia:
Separate legal entity
An LLP is a separate legal entity from its partners, which means that it can enter into contracts, own property, and sue or be sued in its name.
LLPs in Malaysia are relatively easy to set up and maintain. The registration process is straightforward, and there are no requirements for minimum share capital, annual general meetings, or audited financial statements.
LLPs in Malaysia are taxed as partnerships, which means that the income is only taxed at the partner level, and not at the entity level. This can result in a lower tax liability for the firm and its members.
Ability to add or remove partners
An LLP can be expanded by adding new partners, or a partner can be removed if they wish to leave the business. This provides flexibility and can help to ensure the ongoing success of the business.
Attractive to investors
An LLP structure can be an attractive option for investors, as it provides limited liability protection and a flexible structure. This can make it easier to attract capital and investment to the business.
Overall, registering a partnership in Malaysia can provide several benefits, including limited liability protection, tax efficiency, flexibility, and a professional image.
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Registering a Partnership in Malaysia is a straightforward and relatively simple process that can be completed within a few weeks. It is quite a popular business structure in Malaysia, particularly for small and medium-sized businesses, as they offer flexibility, simplicity, and a low cost of entry.
Overall, the process to open a partnership in Malaysia is fairly easy and quick, and businesses need to seek professional advice from Odint Consultancy to ensure all the legal and regulatory requirements are met.
The fees for registering a partnership in Malaysia can be between RM60 and RM100.
Foreign investors may set up the foundation of a foreign Limited Liability Partnership. The members who are part of the international limited liability company don’t require residency in Malaysia.
In Malaysia, the business earnings of a partnership are not taxed at the level of the partnership but are taxed by the hands of each partner according to his share of the income generated by that partnership, at the applicable rates of tax.
A change in business details is possible to register by filling out this form: Change of Business Particulars (Form B).
Typically, the entire registration process can take five to 10 days.