I have quite a number of clients asking me about LLP, following a recent discussion draft issued by the SSM (Suruhanjaya Syarikat Malaysia). This article is the first of two parts, where I will highlight main characteristics of an LLP.
LLP is an alternative form of business entity that combines protection of limited liabilities to its members whilst offering a degree of flexibility in a partnership arrangement for the internal management of the business. The most attractive attribute of an LLP is the continuance of its legal existence and it is independent from its members, which means perpetual succession.
Firstly, an LLP is a separate legal entity just like a company. Its owners have limited liabilities and it can own properties. However, when there is a legal tussle, the LLP can be sued in its own name.
There must be at least 2 partners, either an individual or a body corporate, but there is no limit to the maximum number of partners inside the LLP.
When it comes to legal obligations, the partners who are actively involved in the LLP business will be personally liable for the debts and losses of the LLP, whereas partners who do not have active involvement in running the LLP will not be liable for the debts and losses of the LLP.
An LLP is easy set up as compared to a company. There are much fewer formalities and procedures to comply with than a company. Registration cost is minimal and very few regulatory duties to adhered to. There is no requirement for general meetings, director’s meetings, company secretary, share allotments etc.
When it comes to taxes, the LLP’s profits will be taxed at the partner’s personal income tax for the LLP’s portion owned by him.
That is all the summary of an LLP for the time being. My second part of this article (in a week’s time) will be covering more detailed information, such as closing of an LLP, and the apportionment of profits to its partners.