Why Should You Form A Malaysian Company (Or Limited Liability Partnership)?

Incorporating a company or LLP to run your business in Malaysia has its advantages and could prove to be a great investment in the future. Here’s why.

If you haven’t already done so, we recommend that you read about the types of business entities you can operate in Malaysia here. If you already know what differentiates a company from a limited liability partnership (an LLP), then read on to learn about the benefits of either type of business!

You may or may not be aware that operating a company involves more compliance obligations than running a simple business, and the complexity of operating an LLP falls somewhere in between the two.

There are higher administrative and operational costs associated with the operation of a company, as well as a range of legal and regulatory requirements (such as company secretarial and auditing requirements for a company), which must be met. The decision to 马来西亚有限公司注册 or an LLP to manage your business comes with its advantages and could prove to be a good investment in the long run. Let us explain why.

When describing setting up a company or LLP, we used the term ‘incorporate’ rather than ‘register.’ This is for a very good reason. An ‘incorporation’ refers to making something a legal entity, while a ‘registration’ refers to entering something on an official list. This means that the incorporation process creates a new legal entity, whereas the registration process does not.

Therefore, in order to fully understand the benefits of forming a company or an LLP rather than registering your business as a sole proprietorship or a partnership, you must understand the concept of ‘separate legal personality’ and the concept of limited liability.

How does ‘separate legal personality’ work?

Company and limited liability partnership incorporated under the Companies Act 2016 (the “Companies Act”) and Limited Liability Partnerships Act 2012 (the “LLP Act”) respectively are accorded ‘separate legal entity’ or ‘separate legal personality and capacity’ status under s. 20 of the Companies Act and s. 3 of the LLP Act, which, under the law, gives companies and LLPs separate legal personalities from their members/shareholders and their partners (or owners).

So, companies and limited liability partnerships that have been properly incorporated are legal entities in their own right (though not a human individual as far as the law is concerned) separate from their owners. Businesses registered as sole proprietorships or partnerships do not possess this separate legal personality.

Therefore, even if you were the sole person in charge of a company, you and the company are separate ‘people’ under the law! Interesting right? Companies are people under the law. Similarly, LLPs are separate legal entities from their partners.

Companies and LLPs can sue and be sued in their own right on matters related to them, and its officers and owners will not be personally involved in any such action, so long as they do not act ultra vires (above their legal authority or jurisdiction).

What is limited liability?

Private or public limited liability partnerships and companies (i.e. Sdn Bhd or Bhd) mean their partners or shareholders/members are legally liable for the debts of the LLP or company only up to the nominal value of their portion of shares, and not a penny more! Owners of businesses registered as sole proprietorships or partnerships, on the other hand, do not enjoy this limitation of liability and will be liable for any debts and losses incurred.

Strong Economy

Malaysia is one of the most stable and powerful economies in the world. Malaysia has an economic growth ratio of over 5%, which is much higher than many other countries in the world. Almost all of the best brands and business groups have their registered company settlement in Malaysia due to its better & more established economy. A stable economy is necessary for better business, entrepreneurship, investment, and growth.

Tax policies that are business friendly

You will receive a lot of tax benefits if you register an LLC in Malaysia. An LLC (Limited Liability Company) is taxed only on its profits. The tax rate for LLCs usually ranges from 18% to 26%, depending on the share ratio.