Sdn Bhd vs LLP in Malaysia
When setting up a business in Malaysia, one of the first major decisions every entrepreneur faces is choosing the right business structure. Two of the most popular options are the Private Limited Company (Sdn Bhd) and the Limited Liability Partnership (LLP).
Both offer the attractive benefit of limited liability – protecting the owners’ personal assets from business debts – but they differ significantly in legal structure, compliance requirements, taxation, and governance.
This article provides a detailed comparison between Sdn Bhd and LLP to help you understand which suits your business goals best. Whether you’re an aspiring entrepreneur, consultant, or foreign investor, this guide simplifies the complex regulations under SSM (Companies Commission of Malaysia) and LHDN (Inland Revenue Board of Malaysia).
1. What Is a Private Limited Company (Sdn Bhd)?
A Private Limited Company (Sdn Bhd) is a separate legal entity governed by the Companies Act 2016, registered with SSM. It can own property, enter contracts, and sue or be sued in its own name. The liability of shareholders is limited to the unpaid amount on their shares.
Key Features of Sdn Bhd
| Aspect | Details |
| Minimum Members | 1 shareholder & 1 resident director |
| Maximum Members | 50 shareholders |
| Ownership | Divided into shares |
| Separate Legal Entity | Yes — distinct from owners |
| Taxation | Corporate tax rates between 15% to 24% |
| Annual Audit | Mandatory (unless exempted for micro/small companies) |
| Annual Filing | Annual Return & Audited Financial Statements |
| Perpetual Succession | Yes — unaffected by change of ownership |
Why Sdn Bhd Is Popular in Malaysia
Among all the business structures available in Malaysia, the Private Limited Company (Sdn Bhd) remains the most popular and preferred choice — especially for entrepreneurs, startups, and growing SMEs. Its balance between limited liability protection, professional credibility, and scalability makes it a compelling option for both local and foreign investors.
i. Limited Liability and Asset Protection
One of the biggest reasons Sdn Bhd is preferred is the limited liability protection it offers. This means shareholders’ personal assets are protected from company debts or legal actions. Your liability is limited to the amount you invest in the company — a huge advantage compared to sole proprietorships or conventional partnerships, where owners are personally liable for business debts.
This protection gives business owners peace of mind and encourages long-term growth, as risks are contained within the company structure.
ii. Professional Image and Credibility
A Sdn Bhd structure enhances your business credibility. It reflects a formal, registered corporate entity under the Companies Act 2016, governed by the Companies Commission of Malaysia (SSM).
Clients, suppliers, banks, and investors generally prefer dealing with Sdn Bhd companies as they’re regulated, transparent, and accountable.
Moreover, many corporations and government tenders require working only with incorporated companies — giving Sdn Bhd a competitive edge in winning contracts and partnerships.
iii. Tax Efficiency and Incentives
Malaysia offers attractive corporate tax rates for Sdn Bhd companies.
- For the first RM150,000 of chargeable income — tax rate is 15%/17% (for SMEs meeting qualifying criteria).
- The remaining chargeable income is taxed at 24%.
Additionally, incorporated companies can claim various tax deductions and incentives, such as capital allowances, R&D deductions, reinvestment allowances, and pioneer status (for certain industries).
These benefits often result in better tax efficiency than operating as a sole proprietor or partnership.
iv. Ease of Expansion and Fundraising
As a separate legal entity, a Sdn Bhd can raise funds by issuing new shares, securing bank loans, or attracting investors.
This flexibility makes it easier to scale up operations, expand into new markets, or even attract venture capital — something that’s difficult to achieve for non-incorporated businesses.
v. Continuity and Perpetual Succession
Unlike sole proprietorships, which end with the owner’s retirement or death, a Sdn Bhd enjoys perpetual succession. The company continues to exist even if shareholders or directors change, ensuring business continuity and long-term value.
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2. What Is a Limited Liability Partnership (LLP)?
A Limited Liability Partnership (LLP) was introduced under the Limited Liability Partnerships Act 2012 to offer entrepreneurs a hybrid structure — combining the flexibility of a partnership with the limited liability protection of a company.
Key Features of LLP
| Aspect | Details |
| Minimum Members | 2 partners (individuals or companies) |
| Separate Legal Entity | Yes |
| Ownership | Partners contribute capital (no shares) |
| Liability | Limited to agreed capital contribution |
| Taxation | Flat corporate tax rate of 24% |
| Annual Filing | Annual Declaration of Solvency |
| Audit Requirement | No audit needed |
| Governing Law | LLP Act 2012 |
Why LLP Appeals to Entrepreneurs
i. Flexible Management Structure
Unlike a Sdn Bhd, which requires at least one director and a company secretary, an LLP can be managed by its partners according to their agreed terms in the LLP Agreement. There’s no need for board meetings, shareholder resolutions, or company secretarial filings — giving entrepreneurs freedom and flexibility to run the business as they see fit.
This feature particularly appeals to small teams or family businesses that want to operate efficiently without being tied down by complex governance structures.
ii. Low Maintenance and Cost Efficiency
Running an LLP in Malaysia is more affordable and less bureaucratic than maintaining a Sdn Bhd.
- There’s no requirement for annual audits unless specified by the partners.
- Annual declarations are submitted online to SSM, similar to annual returns but simpler.
- There’s no need for a company secretary or separate board meetings.
For many startups or professional services firms, this translates into significant cost savings on compliance and administration.
iii. Limited Liability Protection
Just like in a Sdn Bhd, partners in an LLP enjoy limited liability — meaning their personal assets are protected from business debts and liabilities, except in cases of fraud or wrongful acts. This gives business owners peace of mind while maintaining the collaborative nature of a partnership.
iv. Pass-Through Taxation
Unlike Sdn Bhd companies, which are taxed as separate legal entities, an LLP in Malaysia is tax-transparent.
This means profits are taxed at the partner level — each partner pays income tax individually based on their profit share.
This system can be advantageous for small businesses where profits are modest, as it avoids double taxation and keeps the structure simple.
v. Ideal for Professionals and Startups
LLPs are particularly suitable for:
- Professionals (lawyers, accountants, consultants, architects) who want to work together but still protect themselves legally;
- Startups or small businesses that need a legitimate business registration without the high compliance cost of a Sdn Bhd;
- Family-run or joint ventures, where trust among partners already exists.
It’s a practical middle ground between a partnership and a company — with legal recognition and limited liability protection.
💬 Need help deciding between Sdn Bhd and LLP?
Our consultants at Amaze Advisory provide free initial consultations to help you choose the right business structure for your goals.
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3. Detailed Compliance Requirements and Timeline
Both Sdn Bhd and LLP must comply with Malaysia’s SSM and LHDN regulations, though the complexity and cost differ greatly.
A. Sdn Bhd Compliance Requirements
| Compliance Area | Description | Frequency / Deadline |
| Company Secretary Appointment | Must appoint within 30 days of incorporation | One-time |
| Annual Return (Section 68) | File within 30 days from incorporation anniversary | Annually |
| Audited Financial Statements | Prepared and lodged within 30 days after circulation to shareholders | Annually |
| First Financial Year-End | Up to 18 months from incorporation date | One-time |
| Tax Estimate (Form CP204) | First Tax Estimate to be submitted within 3 months from start of financial year, subsequently at least one month before the commencement of the next financial year | Annually |
| Corporate Tax Filing (Form C) | Submit within 7 months from financial year-end | Annually |
| Employer Tax (Form E & PCB) | Employer filing by 31 March annually | Annually |
| Audit Exemption | Allowed* | Based on SSM thresholds |
B. LLP Compliance Requirements
| Compliance Area | Description | Frequency / Deadline |
| Registration with SSM | Online through MyLLP Portal | One-time |
| Compliance Officer Appointment | Must be a Malaysian resident | Ongoing |
| Annual Declaration of Solvency | File within 90 days from end of financial year | Annually |
| Record Keeping | Maintain accounting records for at least 7 years | Continuous |
| Tax Estimate (Form CP204) | First Tax Estimate to be submitted within 3 months from start of financial year, subsequently at least one month before the commencement of the next financial year | Annually |
| Tax Return (Form PT) | Submit within 7 months from financial year-end | Annually |
📢 Compliance Made Easy with Amaze Advisory
Managing your deadlines with SSM and LHDN can be overwhelming. Our experts handle statutory filings, accounting, audit coordination, and tax submissions for both Sdn Bhd and LLP — ensuring zero penalties and full compliance.
Email salesteam@amazeadvisory.com or call +6013-284 7678 / +6013-323 7678 to ensure you stay on top of compliance.
4. Advantages of Sdn Bhd
✅ 1. Limited Liability
Shareholders’ personal assets are protected; liability is limited to their capital contribution.
✅ 2. Strong Market Reputation
A Sdn Bhd structure enhances credibility with suppliers, clients, and investors, making it easier to secure contracts and funding.
✅ 3. Separate Legal Entity
The company continues to exist despite changes in directors or shareholders — ensuring business continuity.
✅ 4. Easier Access to Financing
Banks and investors prefer funding Sdn Bhd companies due to regulatory transparency and audited accounts.
✅ 5. Tax Efficiency and Incentives
Eligible for SME tax rates (15% on first RM150,000) and various government incentives for manufacturing, tech, or export businesses.
✅ 6. Growth-Oriented Structure
Suitable for businesses intending to expand, franchise, or eventually convert to a public company.
5. Disadvantages of Sdn Bhd
❌ 1. Higher Compliance Cost
You must appoint a licensed company secretary, prepare audited financial statements, and file annual returns.
❌ 2. Complex Administrative Process
Every major decision must be recorded through board resolutions and filings with SSM.
❌ 3. Less Privacy
Financial statements are publicly accessible, which might not appeal to smaller private businesses.
❌ 4. Slower Decision-Making
Formal governance can limit flexibility compared to LLP or sole proprietorships.
6. Advantages of LLP
✅ 1. Limited Liability for Partners
Partners are protected from personal liability except in cases of fraud or negligence.
✅ 2. Flexible Internal Structure
Management roles and profit-sharing ratios are defined in the LLP Agreement — not dictated by law.
✅ 3. No Audit Requirement
Reduces annual cost and administrative burden.
✅ 4. Lower Setup and Maintenance Costs
No share capital, no audit, and fewer filings make LLPs budget-friendly.
✅ 5. Perpetual Succession
Like companies, LLPs continue despite changes in partners.
7. Disadvantages of LLP
❌ 1. No Shareholding or Equity Investors
LLPs cannot issue shares — limiting ability to raise venture capital or attract investors.
❌ 2. Limited Credibility for Large Clients
Corporates and tenders often prefer dealing with Sdn Bhd companies due to governance and transparency.
❌ 3. Fixed Tax Rate
LLPs are taxed at a flat 24%, which may be higher than SME rates applicable to Sdn Bhd.
❌ 4. Public Accessibility of Information
Certain details like partner names and solvency declarations are publicly available on SSM.
8. Sdn Bhd vs LLP: Key Comparison Table
| Aspect | Sdn Bhd | LLP |
| Governing Law | Companies Act 2016 | LLP Act 2012 |
| Minimum Members | 1 shareholder, 1 director | 2 partners |
| Legal Entity | Yes | Yes |
| Audit Requirement | Mandatory (unless exempt) | Not required |
| Tax Rate | 15%–24% | Flat 24% |
| Compliance Cost | Moderate to High | Low |
| Transfer of Ownership | Via share transfer | Requires new LLP Agreement |
| Suitable For | Scalable, investor-backed businesses | Professionals, small partnerships |
| Access to Funding | Easier | Limited |
| Public Image | High credibility | Moderate credibility |
9. Which Is Right for You?
| Business Goal | Recommended Structure |
| Raising capital or investors | Sdn Bhd |
| Professional partnerships | LLP |
| Seeking credibility & contracts | Sdn Bhd |
| Low-cost operations | LLP |
| Long-term expansion or franchise | Sdn Bhd |
| Simple internal management | LLP |
💡 Pro Tip:
If your long-term vision involves growth, investors, or regional expansion, go for Sdn Bhd.
If your business is small, partnership-based, or service-oriented, LLP offers simplicity and flexibility.
10. How Amaze Advisory Can Help
At Amaze Advisory, we simplify business setup and compliance for entrepreneurs and investors. Whether you choose Sdn Bhd or LLP, our team ensures full legal and tax compliance from day one.
Our services include:
- ✅ Company & LLP incorporation (SSM)
- ✅ Accounting, audit coordination & tax filing (LHDN)
- ✅ Payroll & HR outsourcing
- ✅ Corporate secretarial & compliance support
- ✅ Business structuring and advisory
📞 Get Started with Amaze Advisory Today!
✔️ Email: salesteam@amazeadvisory.com
✔️ Phone: +6013-284 7678 / +6013-323 7678
Contact Amaze Advisory today and take the first step toward building your business in Malaysia.
