Sdn Bhd Company vs Limited Liability Partnership MY

SSM Legal Base: Companies Act or LLP Act

A Sdn Bhd (Sendirian Berhad) is a private company limited by shares under the Companies Act 2016. An LLP is a body corporate under the Limited Liability Partnerships Act 2012. Both have separate legal personality and perpetual succession — they sign tenancy agreements, employ staff, sue, and are sued in their own names. The difference sits in the internal organs.

Sdn Bhd minimums: one shareholder, one director. That director must maintain a principal place of residence in Malaysia. A company secretary qualified under SSM is mandatory at incorporation (Section 236), and the company must maintain a registered office from day one. Maximum 50 shareholders.

LLP minimums: two partners, at least one of whom is ordinarily resident in Malaysia. There are no shares, no directors, no secretary. The LLP appoints one of its partners as compliance officer and files confirmations of solvency with SSM. Names end with “Sdn Bhd” for companies and “LLP” or “PLT” for LLPs — the latter matters when your vendor profile form asks for an SSM legal-entity code.

Tax Split: RM600k Band versus Flat 24%

This is the headline arithmetic, and it decides most cases.

An eligible SME Sdn Bhd — paid-up capital not exceeding RM2.5 million at the start of the basis year, and gross business income under RM50 million — pays 17% on the first RM600,000 of chargeable income, then 24% on the balance.

An LLP does not access that band. The Income Tax Act 1967 treats an LLP as a body of persons and assesses it at the entity level at 24% from the first ringgit. There is no pass-through treatment; the partners are not separately assessed on the same profit.

Run the real numbers on RM600,000 chargeable profit:

– Sdn Bhd assessment: RM102,000

– LLP assessment: RM144,000

– Gap: RM42,000 per year

That RM42,000 covers the entire audit and secretary budget twice over. At RM100,000 profit the gap narrows to RM7,000, which is roughly the cost of one statutory audit — so the LLP is roughly cost-neutral only at very small profits. Above RM150,000, the Sdn Bhd pulls ahead on tax alone.

Distributions follow a single-tier principle for both: Sdn Bhd dividends are exempt in shareholders’ hands, and LLP partner drawings are not taxed a second time after the entity-level charge.

Audit and Secretary Versus Solvency Declaration

An active Sdn Bhd in Kuala Lumpur pays three recurring compliance items the LLP never touches:

– Company secretary: RM2,000–RM4,000 per year for a standard SME engagement

– Licensed auditor: RM3,000–RM8,000 depending on transaction volume and inventory

– SSM annual return: RM30 plus late penalty accumulation

The audit is the unavoidable one. Section 267 of the Companies Act 2016 exempts only dormant companies and companies with annual revenue of RM100,000 or below. Any genuinely trading company is audited. In practice, a KL SME with two directors and a MYOB file still pays RM4,000–RM6,000 per year just to stay audit-compliant.

The LLP’s recurring filing is an annual declaration of solvency — a one-page form on the MyLLP portal, submitted within 60 days of the financial year end, with a flat RM50 fee. No audit requirement. No qualified secretary.

There is one commercial catch: Malaysian banks do not treat “no audit required” as “no audit needed.” A Maybank or CIMB credit officer looking at a RM250,000 trade line will still request audited management accounts as part of due diligence. The legal exemption lowers the mandatory cost; it does not remove the ask once you leave the self-funded range.

Equity, Funding, Exit: Why VCs Need Sdn Bhd

For product companies in the Klang Valley, this is the decisive point. An LLP has no share capital, which closes access to the entire Malaysian funding stack:

– No issuance of ordinary or preference shares to seed investors

– No convertible notes or SAFE instruments — they convert into shares that do not exist

– No ESOS for early engineers — you cannot grant options over a structure with no equity

– No share-sale exit. An acquirer cannot “buy” an LLP; the buyer must purchase assets and novate contracts one by one

MDEC’s incentives and MSC status are channeled to companies incorporated under the Companies Act; an LLP sits outside that framework. The only profit lever an LLP offers is the profit-sharing ratio — workable for a billing-time professional firm, useless for a founder handing out a liquidation preference.

One practical note: a conventional partnership converting into an LLP has a clean statutory path under Section 40 of the LLP Act 2012. The reverse is not a conversion. Moving an LLP into a Sdn Bhd means dissolution, fresh incorporation, and re-signing every contract, permit, and bank mandate.

Bank Onboarding, E-Invoicing, and Vendor Reality

Both structures can open current accounts at Maybank, CIMB, RHB, OCBC, and Standard Chartered. The gap appears in credit and procurement workflows.

– Working capital and overdrafts: LLPs have no share capital, so credit approval leans harder on the partners’ personal assets. Trade lines and recurring OD limits are priced more favourably on a Sdn Bhd balance sheet with issued capital and retained earnings.

– MyInvois and SST: The IRBM’s e-invoicing requirements apply to both structures at identical thresholds. The API integration work is the same. SST registration at RM500,000 annual turnover is the same.

– Procurement and vendor master files: e-Perolehan and the vendor portals of Tenaga Nasional, Petronas, and Telekom Malaysia carry a legal-entity-type field. “Sdn Bhd” is accepted without discussion; “LLP” triggers an extra supplier-due-diligence screen, and some procurement teams reject LLPs outright on tenders above RM100,000.

The verdict is structural, not emotional. If you are building a product, raising money, or selling to GLCs, incorporate the Sdn Bhd. If you are a self-funded consultancy of two to five partners who bill time and want the lowest possible annual compliance bill, the LLP works — until a bank or tender requires audited numbers anyway.