LLP (Perkongsian Liabiliti Terhad): the body corporate that files like a partnership

Bahasa Malaysia: Perkongsian Liabiliti Terhad · English: Limited Liability Partnership · 中文: 有限责任合伙

Two things about the Malaysian LLP surprise almost everyone who meets the term for the first time. It is not a partnership — section 4 of the Limited Liability Partnerships Act 2012 switches the Partnership Act 1961 off entirely. And it is not tax transparent: Malaysia taxes the LLP itself, then exempts what it pays out to partners.

What it actually is: a body corporate with separate legal personality and perpetual succession under s.3, whose internal affairs are governed by an LLP agreement instead of a constitution and a board. Its name must end with “Perkongsian Liabiliti Terhad” or PLT (s.13).

In practice

Registration is with SSM through the MyLLP portal for a fee of RM500, against RM1,000 to incorporate a company. It needs at least two partners — individuals or bodies corporate, with no upper limit — and at least one compliance officer who is a citizen or permanent resident ordinarily residing in Malaysia, drawn from the partners or from people qualified to act as a company secretary (s.27).

The ongoing load is deliberately light: an annual declaration lodged by any two partners stating whether the LLP appears able to pay its debts as they fall due, within 90 days of the financial year end and, for the first one, within 18 months of registration (s.68). Accounting records must give a true and fair view and be kept seven years (s.69), but audit is not required unless the LLP agreement says so (s.69(5)).

When an LLP beats an Sdn Bhd — and when it doesn’t

Situation	Better fit
Two or more principals sharing profits, no outside capital	LLP
Chartered accountants, advocates and solicitors, secretaries in practice	LLP — the First Schedule recognises these professional practices
You want to avoid a company secretary and a statutory audit	LLP
One founder, no partner	Sdn Bhd — an LLP needs two
Raising equity, granting share options, planning an exit	Sdn Bhd — an LLP has capital contributions, not shares
More than 20% of capital contributed by foreigners or foreign companies	Neither is automatic; para 2E of Schedule 1, ITA 1967 removes the LLP’s reduced rate bands

Common mistakes

• Assuming the LLP shields you personally. Section 21(3) preserves your own liability in tort for your own wrongful act. That is precisely why s.8 makes professional indemnity insurance a condition for a professional-practice LLP.
• Letting partner numbers fall to one. Section 7 allows up to six months (extendable by the Registrar to a year); past that, a partner who knew or ought to have known becomes personally liable, jointly and severally with the LLP, for obligations incurred after that period.
• Calling it tax transparent. The LLP is taxed on its own chargeable income; profits paid, credited or distributed to partners are exempt under Schedule 6, para 12C of the Income Tax Act 1967.

Related terms

• Sdn Bhd
• Paid-up Capital

What’s next

For the full decision, including which professions have no other limited-liability option, read LLP vs Sdn Bhd. To set one up, see registering an LLP in Malaysia; for the rate bands and filing form, see LLP taxation.