Definition of Partnership

Usually, we will form up our business with more than 1 person to capture more resources and capital easily. So, a partnership or private limited company (Sdn. Bhd.) will be your choice if you want to incorporate a business in Malaysia with more than 1 member.


A partnership is a traditional and easy way for more than one member to form a business to start an operation. It is governed under the Partnership Act 1961 (Revised 1974). Here is the main advantage of forming a partnership business:

1. Easy to setup
You can easily register with Suruhanjaya Syarikat Malaysia (SSM) by submitting business owners’ information, some basic business information, and a partnership agreement only.

2. Low cost incurred
Forming a partnership does not cost you much. All you need is just pay a yearly fee to SSM to maintain the business.

3. Taxation
Business owners pay tax according to the personal income tax rate. If you have an annual income of more than RM6,000, your lowest tax rate is just 1%.

4. Decision-making
The decision-making is faster and easier compared to Private Limited Company (Sdn. Bhd.). The reason is no general meeting and records need to be prepared. The partnership agreement also clearly stated the partners’ roles and profit distribution. Hence, there is less potential conflict among partners.

However, there are also some significant disadvantages of partnership business:
Liability: As a partnership business is not a separate legal entity, this means that the liabilities of the business will be owned by the members or even liabilities of other members. In other words, means that you might need to involve your assets to pay liabilities owned by the business.
Continuation of Business: It lacks continuity because of the death, insolvency, insanity, or retirement of a partner, firm may come to an end.
Source of Fund: It is difficult to obtain more capital from third parties.
Financing: It is relatively difficult to get funds from financial institutions. It is because the accounts are unaudited.