Choosing between LLP vs Sdn Bhd is one of the first big decisions for a new business in Malaysia, and for larger ventures the next question is whether you would ever need a Berhad. The three structures sit at different points on the scale: an LLP is a lighter, lower-cost partnership vehicle, a Sdn Bhd is the standard private company, and a Berhad is a public company built for raising money from the public.
This guide compares all three side by side so you can pick the one that fits your business today and see where you might move later.
LLP vs Sdn Bhd vs Berhad: Quick Comparison
| Factor | LLP | Sdn Bhd | Berhad |
|---|---|---|---|
| Governing law | Limited Liability Partnerships Act 2012 | Companies Act 2016 | Companies Act 2016 |
| Legal status | Separate legal entity | Separate legal entity | Separate legal entity |
| Owners | At least 2 partners, no stated upper limit | 1 to 50 shareholders | No cap on shareholders |
| Directors | Not applicable; run by partners | At least 1 | At least 2 |
| Liability | Limited, but each partner stays personally liable for their own negligence or wrongdoing | Limited to the amount unpaid on shares | Limited to the amount unpaid on shares |
| Offer shares to the public | No | No | Yes |
| Company secretary | Not required, but a compliance officer is | Compulsory | Compulsory |
| Audit | No mandatory audit threshold, though a bank may ask for audited accounts | Generally required, with exemption for some small companies | Required |
| AGM | Not applicable | Optional by default | Compulsory every year |
| Best for | Small businesses and professional practices that want low cost and simple administration | Most SMEs, startups and foreign-owned businesses | Large businesses raising public capital or planning to list |
What Is an LLP in Malaysia?
A Limited Liability Partnership is a hybrid: it works like a partnership internally but is a separate legal entity, so it can own property, sign contracts, and sue or be sued in its own name. It is registered with SSM under the Limited Liability Partnerships Act 2012 and needs at least two partners.
Partners are generally shielded from the LLP’s business debts, but a partner remains personally liable for their own negligence, fraud or misconduct, so an LLP does not protect you from your own mistakes the way many people assume. Some professional firms, such as accounting practices, that are not permitted to operate as a Sdn Bhd commonly use an LLP for this reason.
If you are still deciding whether to register anything beyond a sole proprietorship, read Sdn Bhd vs Enterprise first.
LLP vs Sdn Bhd: Key Differences
Setup and running cost. In the LLP vs Sdn Bhd comparison, the LLP is cheaper at every stage. SSM registration is a fraction of what a Sdn Bhd costs, and the ongoing costs are lower too, since an LLP does not need a company secretary and has no mandatory audit threshold. A Sdn Bhd costs roughly RM1,050 to RM1,060 in SSM fees alone (see How to Register a Sdn Bhd in Malaysia), plus a company secretary and, in most cases, an audit every year.
Compliance. A Sdn Bhd must appoint a company secretary within 30 days of incorporation, file an annual return, and circulate financial statements. An LLP files an annual declaration with SSM instead and appoints a compliance officer. For a one-person or two-person business, the LLP route is noticeably lighter.
Tax. Both structures are taxed as separate entities rather than at the owners’ personal rates, and qualifying SMEs can get preferential corporate rates in both. Where they differ is in incentives and in how owner remuneration is treated, which is why it is worth running the numbers with an accountant before choosing.
Credibility and fundraising. This is where a Sdn Bhd wins. Banks, larger clients and investors are far more comfortable with a company, and a Sdn Bhd can issue shares to bring in investors. An LLP is generally seen as a vehicle for smaller businesses and cannot raise equity the same way.
Foreign ownership. A Sdn Bhd can be 100% foreign-owned in most sectors, with at least one resident director (see Can a Foreigner Open a Sdn Bhd in Malaysia?). An LLP can also have foreign partners, but residency requirements apply, so check them before you rely on this route.
Sdn Bhd vs Berhad: What Is the Difference?
A Sdn Bhd is a private company and a Berhad (Bhd) is a public company. Both are governed by the Companies Act 2016, but they are built for different purposes:
- Shareholders: a Sdn Bhd is capped at 50 shareholders and must restrict the transfer of its shares. A Berhad has no cap.
- Raising money: a Sdn Bhd cannot invite the public to buy its shares. A Berhad can offer shares to the public, which is the route to listing on the stock exchange, and only a public company can list.
- Directors: a Sdn Bhd needs at least one director. A Berhad needs at least two.
- AGM: optional by default for a Sdn Bhd (see AGM for Sdn Bhd), compulsory every year for a Berhad.
- Disclosure: a Berhad faces stricter reporting and public disclosure obligations.
Being a Berhad does not automatically mean being listed, but in practice a public company only makes sense for businesses that need to raise public capital or plan to list. If a Sdn Bhd later outgrows its structure, it can convert to a public company through a notice lodged with SSM under Section 41 of the Companies Act 2016.
LLP vs Sdn Bhd vs Berhad: Which Should You Choose?
Choose an LLP if you run a small or professional business with a few partners, you want low setup and running costs, and you do not need outside investors or large corporate clients who insist on dealing with a company.
Choose a Sdn Bhd if you want credibility with banks and clients, plan to grow or bring in investors, are a foreigner setting up in Malaysia, or want a structure that is widely understood and accepted. For most Malaysian SMEs and startups, this is the default.
Choose a Berhad only if you are raising capital from the public or planning to list. For almost every small and medium business, a Berhad adds cost and disclosure obligations with no upside.
If you start with one structure and outgrow it, moving to another usually means setting up a new entity and transferring the business across, so if you already expect growth or investors, it is often cheaper to start with a Sdn Bhd than to restructure later.
Not sure which structure fits your business? Get a free consultation and we will talk through your plans, or see our Company Incorporation service if you already know you want a Sdn Bhd.
Frequently Asked Questions
Q: What is the difference between an LLP and a Sdn Bhd?
An LLP is a partnership-style vehicle with a separate legal identity, lower setup and running costs, and lighter compliance. A Sdn Bhd is a private limited company with a company secretary, an annual return, financial statements, and more credibility with banks and investors.
Q: Is an LLP cheaper than a Sdn Bhd?
Yes, both to register and to maintain. An LLP does not need a company secretary and has no mandatory audit threshold, while a Sdn Bhd generally needs both.
Q: Do LLP partners have unlimited liability?
No. Partners are generally protected from the LLP’s business debts, but each partner remains personally liable for their own negligence, fraud or misconduct.
Q: What is the difference between Sdn Bhd and Berhad?
A Sdn Bhd is a private company capped at 50 shareholders that cannot offer shares to the public. A Berhad is a public company with no shareholder cap, at least two directors, a compulsory annual AGM, and the ability to offer shares to the public and list.
Q: Can a Sdn Bhd become a Berhad?
Yes. A private company can convert to a public company by lodging a notice with SSM under Section 41 of the Companies Act 2016.
Q: Which is best for a small business in Malaysia, LLP or Sdn Bhd?
An LLP suits very small or professional businesses that want low cost and simple administration. A Sdn Bhd suits businesses that want more credibility, plan to grow, bring in investors, or have foreign owners.
