How to Convert a Limited Liability Partnership (LLP) to Sdn. Bhd. in Malaysia: A Step-by-Step Guide

In Malaysia, the Limited Liability Partnership (LLP) structure offers flexibility and limited liability protection, making it a popular choice for small and medium-sized businesses. However, as businesses grow, many owners consider converting their LLP to a Private Limited Company (Sdn. Bhd.) to take advantage of the additional benefits that come with the Sdn. Bhd. structure. This article provides a comprehensive guide on how to convert an LLP to a Sdn. Bhd. in Malaysia, highlighting the key steps, benefits, and considerations involved in the process.

 

Why Convert an LLP to a Sdn. Bhd.?

Before diving into the conversion process, it’s important to understand why businesses choose to convert their LLP to a Sdn. Bhd.. Here are some of the main reasons:

1. Access to More Funding: A Sdn. Bhd. can raise capital by issuing shares to investors, making it easier to attract funding for business expansion. This is particularly beneficial for businesses looking to grow rapidly.
2. Increased Credibility: A Sdn. Bhd. is often perceived as more credible and established compared to an LLP, which can enhance your business’s reputation with clients, suppliers, and partners.
3. Shareholder Structure: Unlike an LLP, which is limited to partners, a Sdn. Bhd. allows for a more flexible shareholder structure, making it easier to manage ownership stakes.
4. Perpetual Succession: A Sdn. Bhd. continues to exist even if the shareholders or directors change, providing greater stability and continuity for the business.

 

 

Steps to Convert an LLP to Sdn. Bhd.

Converting an LLP to a Sdn. Bhd. involves several key steps. Below is a step-by-step guide to help you through the process:

1. Prepare the Necessary Documentation

The first step in the conversion process is to gather and prepare the necessary documents. This includes:

• Consent from Partners: All partners in the LLP must agree to the conversion. This consent should be documented in writing.
• LLP Agreement: The existing LLP agreement will need to be reviewed and aligned with the new company structure.
• Business Profile: Prepare a detailed profile of the business, including financial statements, to facilitate the conversion process.

2. Name Reservation and Approval

You’ll need to conduct a name search with the Companies Commission of Malaysia (SSM) to ensure that your desired company name is available and does not conflict with existing businesses. Once the name is approved, it will be reserved for your new Sdn. Bhd..

3. Prepare and Submit Incorporation Documents

The next step is to prepare the incorporation documents for the Sdn. Bhd., which include:

• Company Constitution: This document outlines the rules and regulations governing the company’s operations.
• Form 48A: A statutory declaration by a director or promoter before appointment.
• Form 6: A declaration of compliance by the company secretary.
• Details of Directors and Shareholders: Information about the initial directors and shareholders of the company.

These documents must be submitted to the SSM for approval.

4. Transfer of Assets and Liabilities

Once the Sdn. Bhd. is incorporated, the assets and liabilities of the LLP need to be transferred to the new company. This step involves:

• Asset Transfer Agreements: Drafting and executing agreements to transfer ownership of assets from the LLP to the Sdn. Bhd..
• Liability Assumption: Ensuring that the new company assumes all liabilities of the LLP, including debts and obligations.

5. Dissolution of the LLP

After the successful transfer of assets and liabilities, the LLP must be dissolved. This involves submitting the necessary documents to the SSM, including the final accounts and a notice of cessation.

6. Update Statutory Records

Finally, update all statutory records to reflect the change in business structure. This includes informing relevant authorities, updating business licenses, and notifying clients, suppliers, and stakeholders of the change.

 

Considerations When Converting LLP to Sdn. Bhd.

While converting an LLP to a Sdn. Bhd. offers numerous benefits, there are several considerations to keep in mind:

• Tax Implications: The tax treatment of a Sdn. Bhd. differs from that of an LLP. It’s advisable to consult a tax advisor to understand the potential tax implications of the conversion.
• Compliance Requirements: A Sdn. Bhd. is subject to stricter compliance and reporting requirements, including the submission of annual returns and audited financial statements.
• Costs Involved: The conversion process involves certain costs, including professional fees for legal and accounting services, as well as statutory fees for the incorporation and dissolution processes.

 

Conclusion

Converting an LLP to a Sdn. Bhd. is a significant step that can offer substantial benefits for growing businesses in Malaysia. By following the steps outlined in this guide and seeking professional advice when necessary, you can ensure a smooth transition and position your business for long-term success.

If you’re considering converting your LLP to a Sdn. Bhd., Consistant Info is here to assist you through every stage of the process. Our experienced team of professionals will guide you through the legal, financial, and administrative aspects of the conversion, ensuring a seamless transition to your new business structure.