Sole Proprietor vs LLP vs General Partnership vs Company
in Malaysia
Types of Business Entities
The following are the common forms of business organization in Malaysia:-
1. By an individual operating as Sole Proprietor
2. By two or more (but not more than 20) persons in Partnership, or
3. By two or more persons in Limited Liability Partnership, or
4. By a locally incorporated Company or by a Foreign Company registered under the provisions of
the Company Act 1965
Private Limited Limited General Sole
Company Liability Partnership Proprietorship
Partnership
(LLP)
Entity Name Company name Company Choice of Choice of Trade
Appearances ended with the name ended Trade Name Name subjected
word Sdn Bhd or with the word subjected to to ROB approval
Bhd PLT ROB approval
(Perkongsian
Liabiliti
Terhad)
Capital Share capital Partners Partners Own contribution
Contribution contribution contribution
Owner(s) of the Company(members LLP (partners Partners Sole Proprietor
business / shareholders own have a share
shares in the in the capital
company that give and profits of
them certain rights the LLP)
in relation to the
Company)
Legal Status Separate legal Separate Not a Not a separate
entity legal entity separate legal legal entity
entity
Party that is liable Company LLP Partners Sole Proprietor
for debts of the
business
Responsibility for Board of Directors Partners Partners Sole Proprietor
management of
business
Personal liability No personal liability No personal Unlimited Unlimited liability
of individual liability of liability (jointly which can extend
director or partner, and severally to personal assets
shareholder except for liable with the of the sole
own wrongful partnership) proprietor
Liabilities borne by act or which can
the directors or omission or extend to
shareholders are to without personal
the extent of authority assets of the
unpaid shares only partners
Liabilities
borne by the
partners are
jointly and
severally with
the LLP to the
extent of
unpaid share
capital only
No. Of Minimum 1 and Minimum 2 2 to 20 Sole proprietor
Shareholdes/ maximum 50 in and no partners only
Partners private company maximum (Except for
limit partnerships
for
professional
practice with
no maximum
limit)
Company Secretary Qualified Company Compliance N/A N/A
/ Compliance Secretary Officer or
officer partner of the
LLP
Statutory Audit Required to be No No Audit No Audit required
Requirement Audit compulsory required
unless it is
provided in
the
partnership
agreement
Annual Compliance Must file annual Must lodge an
return and financial annual
statements every declaration
calendar year. and solvency
statement
with CCM (the
1st within 18
months from
the date of
registration
and
thereafter, 90
days from the
end of the
financial year)
Annual Submission Annual Return with Annual
to SSM Audited/ Unaudited Declaration
Financial
Statement
Annual Fee to SSM RM200 RM200 Trade Name Trade Name
RM60 per RM60 per year
year
Personal Name
Personal RM30 per year
Name
RM30 per
year
Income Tax Status / Tax on Company / Tax on LLP / Tax on Tax on Partners/
Income Tax Rate On the first 500K On the first Partners/ Sole Proprietor
20%(SME) 500K Sole From 0% to 26%
After 25% 20%(SME) Proprietor
After 25% From 0% to
26%
Rules & Company Act 1965 Limited Registration Registration of
Regulations (CA), Liability of Businesses Businesses Act
Partnership Act 1956 1956 (RBA)
Act 2012 (RBA)
(LLP),
Limited
Liability
Partnership
Regulations
2012
Advantages & More paperwork Less Less Less paperwork
Disadvantages & more expensive paperwork & paperwork & & additional
additional additional formalities
Limited Liability formalities formalities (registration is
(registration is (registration is easy, fast and
easy, fast and easy, fast and fewer documents
Complexity in fewer fewer are needed)
Administration documents documents Unlimited
(statutory audit, are needed) are needed) Liability
AGM, board Limited
resolution and etc) Liability Unlimited Simple
Liability Administration(Not
Higher Simplest compulsory for
Compliance Cost Administration Simple statutory audit)
(Not Administration
one local resident compulsory (Not Lower
director are for statutory compulsory Compliance Cost
required to setup a audit) for statutory
Company audit) Suitable for
Local newly start-up
Suitable for resident Lower business with low
business affordable compliance Compliance entry cost
to maintain officer is Cost
business with required to Not required to
higher operation setup LLP Suitable for disclose financial
cost newly start-up statements to the
Lower business with public.
public will have Compliance low entry cost
access to financial Cost
affairs of the
company. Suitable for Not required
newly start-up to disclose
business with financial
low entry cost statements to
the public.
Not required
to disclose
financial
statements to
the public.
Perpetual
succession :
The
changes
status of the
partners will
not affect the
existence of
the LLP
corporation
In conclusion, a private company (Sdn Bhd) is preferred over business entities with the enforcement of
the new Companies Act 2016 which allows for incorporation by sole director and shareholder and at
the same time offers limited liability feature.
As for LLP, this entity requires minimum 2 partners for registration and appointment of compliance
officer who will be personally liable for all acts of LLP is mandatory. You may also refer to Key Issues
And Ambiguities Faced By Limited Liability Partnership (LLP) for other disadvantages.
In term of compliance costs which will be slightly higher for a private company (Sdn Bhd), it will be
easier to obtain loan under a company compared to any other business entities.
