BDCM-B-Week 16 Tax: Comparison of Company, LLP, Partnership & Sole Proprietor

Comparison of Company, LLP, Partnership & Sole Proprietor

	Company	Limited Liability Partnership (LLP)	General Partnership	Sole Proprietorship
Appearances of Name	Company name ended with the word “Sdn Bhd” or “Bhd”	Company name ended with the word “PLT” (Perkongsian Liabiliti Terhad)	Choice of trade name or personal name	Choice of trade name or personal name
Capital Contribution	Shareholers contribution	Partners contribution	Partners contribution	Own contribution
Owner(s) of the business	Members or shareholders own shares in the company	Partners have a share in the capital and profits of the LLP	Partners	Sole Proprietor
Legal Status	Separate legal entity	Separate legal entity	Not a separate legal entity	Not a separate legal entity
Party that is liable for debts of the business	Company	LLP	Partners	Sole Proprietor
Party responsible for management of business	Board of Directors	Partners	Partners	Sole Proprietor
Personal liability	No personal liability of individual director or shareholder. Liabilities borne by the directors or shareholders are to the extent of unpaid shares capital only.	No personal liability of individual partner. Liabilities borne by the partners are to the extent of unpaid shares capital only.	Unlimited liability (jointly and severally liable with the partnership) which can extend to personal assets of the partners.	Unlimited liability which can extend to personal assets of the sole proprietor.
No. Of Shareholders / Partners	Minimum 1 and maximum 50 in private company	Minimum 2 and no maximum limit	2 to 20 partners (Except for partnerships for professional practice with no maximum limit)	Sole proprietor only
Company Secretary / Compliance officer	Must have a qualified Company Secretary	Must have a Compliance Officer	N/A	N/A
Audit Requirement	Required to be Audit	No Audit required	No Audit required	No Audit required
Annual Filing Compliance to SSM	Must file annual return and audited financial statements every year	Must lodge an annual declaration every year	N/A	N/A
Annual Fee to SSM	Annual Return – RM150 Audited financial statements – RM50	Annual Declaration – RM200	Trade Name – RM60 Personal Name – RM30	Trade Name – RM60 Personal Name – RM30
Income Tax Status	Tax on Company	Tax on LLP	Tax on Partners	Tax on  Sole proprietor
Income Tax Rate YA 2020	SME : On the first RM600,000 income – 17% After – 24% Non SME : Flat – 24%	SME : On the first RM600,000 income – 17% After – 24% Non SME : Flat – 24%	From 0% to 30%	From 0% to 30%
Rules & Regulations	Company Act 2016 (CA)	Limited Liability partnership Act 2012 (LLP), Limited Liability Partnership Regulations 2012	Registration of Businesses Act 1956 (RBA)	Registration of Businesses Act 1956 (RBA)
Formation	More paperwork and most expensive	Fewer paperwork and formalities	Less paperwork and formalities	Less paperwork and formalities

There are several choices when starting a business.

My preference among all is limited liability partnership (LLP) due the followings :

1) Compare with company, lower compliance costs due to no secretary and auditor required which is costly for a start up business.

2) Compare with company, not required to disclose financial statements to the public due to no audit required.

3) Compare with general partnership and sole proprietor with unlimited liability, LLP is separate legal entity and limited liability to partner.

4) Compare with general partnership and sole proprietor maximum tax rate is 30%, while for a LLP is only 24%.