The Difference Between a Limited Liability Partnership and Private Limited Company in Malaysia
- Chow Ping
- 5 days ago
- 6 min read
Updated: 2 days ago
So you've decided to take your business seriously and register it properly.
Smart move.
But now you're staring at two options: Limited Liability Partnership (LLP) or Private Limited Company (Sdn Bhd).
Both sound official. Both offer protection for your personal assets. Both seem... confusingly similar.
But choosing the wrong structure now can cost you thousands in unnecessary compliance fees, tax headaches, and future restructuring costs.
No pressure.
Let's break down the real differences between a Limited Liability Partnership and Private Limited Company in Malaysia – the stuff that actually matters when you're trying to run a business, not just textbook definitions.
What is a Limited Liability Partnership and Private Limited Company in Malaysia?
Private Limited Company (Sdn Bhd) is the heavyweight champion of Malaysian business structures. It's been around forever and is the go-to choice for most businesses.
When you form a Sdn Bhd, you're creating a separate legal entity that exists completely independently from its owners (called shareholders).
It can own property, sign contracts, accumulate debt, steal your lunch from the office fridge (okay not that last one).
Limited Liability Partnership (LLP), or PLT in Malay, is the newer kid on the block.
Introduced in 2012, it's essentially a hybrid – imagine if a Sdn Bhd and a traditional partnership had a baby that inherited the best traits from both parents.
An LLP also exists as its own legal entity, separate from its partners. It offers the same personal asset protection as a Sdn Bhd but operates with far less red tape.
Do I Get More Liability Protection as a Limited Liability Partnership or Private Limited Company in Malaysia?
Both structures protect your personal assets from business debts and liabilities.
If your Sdn Bhd racks up debt or gets sued, creditors can only go after the company's assets.
Your house, car, savings, and secret stash of instant noodles remain untouchable.
Same deal with an LLP. Business creditors can't come after your personal wealth.
But here's a crucial difference: In an LLP, you're still personally liable for your own wrongful acts or omissions.
Mess up personally? You can't hide behind the LLP structure.
In a Sdn Bhd, the separation is more absolute. Even if you're a director, there's a thicker legal wall between you and the company (unless you've given personal guarantees or committed fraud, obviously).
Ownership Structure: Shareholders vs Partners
Sdn Bhd has shareholders who own shares in the company. You need a minimum of one shareholder and can have up to 50. Ownership is measured in shares.
Maybe you own 60%, your business partner owns 40%.
Directors (who can also be shareholders) run the company. Think of shareholders as owners and directors as managers, though in small companies, they're often the same people.
LLP has partners instead of shareholders. You need at least two partners to start, with no upper limit. Partners can be individuals, companies, or a mix of both.
Partners aren't just owners. They're also the ones running the show. There's no separate
"director" layer.
Who's Really Running Things?
Sdn Bhd operates with a board of directors structure. Even if you're a one-person company, there's a formal corporate governance framework.
You need to hold board meetings, pass board resolutions, maintain minutes, and follow the company constitution.
Major decisions require board approval. Want to take on debt? Board resolution. Changing company direction? Board resolution.
LLP tosses much of that formality out the window.
Partners manage the business directly according to their partnership agreement. Want all partners to vote on major decisions? Write it into your agreement. Prefer one managing partner calling the shots? That works too.
No board meetings required. No formal resolutions for every little decision. Just partners working together based on the rules they've set for themselves.
The flexibility is liberating. But you need a rock-solid partnership agreement. Without clear rules, partner disputes can get ugly fast.
Where LLP Really Shines
If there's one area where LLP absolutely demolishes Sdn Bhd, it's compliance requirements.
Sdn Bhd compliance is... a lot:
Annual returns filed with SSM within 30 days of your company anniversary
Mandatory audited financial statements (within 18 months for first year, then annually)
Annual General Meetings (AGMs) as required
Tax returns to LHDN by June 30 each year
SST compliance every two months if registered
Monthly employee statutory deductions by the 15th
Company secretary appointment within 30 days of incorporation
Miss any of these? Penalties. Late filings? More penalties. And LHDN doesn't send friendly reminders – they send scary letters.
LLP compliance is refreshingly simple:
Annual declaration within 90 days of financial year-end (basically just confirming you can pay your debts)
Maintain proper accounting records
Update SSM within 14 days of any changes
Display LLP name and registration number properly
That's it. No mandatory audits. No AGMs. No annual returns.
The time and money you save on compliance can go straight back into growing your business.
What about taxes?
Sdn Bhd is taxed as a separate entity. The company pays corporate tax on its profits (currently up to 24% depending on income level). When you want to take money out personally, you have options:
Salary (taxed as personal income)
Dividends from retained earnings (tax-free if taken from profits already taxed at company level)
Director's fees (taxed as personal income)
This creates opportunities for tax planning. You can leave profits in the company and pay them out strategically.
LLP is tax transparent. The LLP itself doesn't pay tax. Instead, profits flow through directly to partners, who then pay tax at their individual or corporate rates.
If you're an individual partner, you'll pay personal income tax on your share of profits (up to 30%). If you're a corporate partner, you'll pay corporate tax.
Which is better? It depends entirely on your situation. This is exactly the kind of thing you should discuss with your accountant (like us!) before deciding.
Raising Capital and Investment
Planning to raise money from investors? This matters.
Sdn Bhd is investor-friendly. The shareholding structure makes it easy to bring in new investors – just issue new shares. Venture capitalists and institutional investors understand and expect Sdn Bhd structures.
Want to go public someday? You'll need to be a Berhad (public company), and converting from Sdn Bhd to Berhad is straightforward.
LLP is less attractive to traditional investors. Bringing in new partners means amending partnership agreements and redistributing partnership interests. It's messier.
If you plan to raise serious funding rounds or eventually list on Bursa Malaysia, Sdn Bhd is your only real option.
Setup Costs and Time
Sdn Bhd registration costs RM1,010 in government fees, plus RM50 for name search. Add professional help (highly recommended) and you're looking at RM2,000 to RM5,000 total.
Timeline: Usually 1-2 weeks if everything's in order.
LLP registration costs RM500 in government fees, plus RM50 for name search. Professional setup typically runs RM1,500 to RM3,000.
Timeline: Often faster than Sdn Bhd – sometimes approved immediately upon online submission.
Initial setup costs favour LLP slightly, but the real savings come from ongoing compliance costs (or lack thereof).
Banking and Credibility
Sdn Bhd carries more weight in traditional business circles. Banks generally view Sdn Bhds more favorably for loans and credit facilities.
Suppliers and clients, especially larger corporations, often prefer dealing with Sdn Bhds.
LLP is gaining acceptance but still faces more scrutiny from banks. Expect to provide stronger financial records and possibly personal guarantees when applying for business loans.
That said, for professional services and SMEs, LLP credibility is perfectly adequate.
So Which One Should You Choose?
Choose Sdn Bhd if:
You plan to raise significant investment capital
You might want to go public eventually
You're in manufacturing, trading, or other traditional industries
You want maximum credibility with banks and large clients
You need sophisticated tax planning options
Choose LLP if:
You're running a professional practice (law, accounting, consulting)
You're an SME focused on services rather than products
You want minimal compliance hassle
Partners will actively manage the business together
You're not planning to raise VC funding
Still unsure? Consider your 3-5 year business plan. Raising Series A funding? Go Sdn Bhd. Running a stable consulting practice with partners? LLP makes sense.
The Bottom Line
Both Limited Liability Partnerships and Private Limited Companies protect your personal assets and provide legitimate business structures.
Sdn Bhd is the traditional, investor-friendly, heavyweight option with more compliance requirements but broader acceptance.
LLP is the flexible, lower-maintenance option that works beautifully for professional services and SMEs who don't need external investment.
Neither is objectively "better" – it depends entirely on your specific business goals, industry, and plans for growth.
What matters most is that you make an informed decision now rather than realizing two years later that you chose wrong and need to restructure.
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