Partnerships law in Malaysia

Partnerships law in Malaysia

Let’s begin by defining what a partnership is; it is basically a type of business organization in Malaysia. The business can exist when there is at least two persons that have agreed to carry on a business with the common interest of making a profit. The legalities that are required to set up a partnership are minimal and it is almost similar to that of the sole proprietorship. As such a partnership cannot exist as a separate legal entity.

A partnership will most likely spring up between friends; however it is still advisable that you draw up a Partnership agreement by a solicitor in order to avoid any problems in the future. In the agreement it should state the responsibilities that each of the partners are responsible for and also on what grounds as well as how the partnership may be terminated. If there are disputes that arise in the dealings between the partners, the agreement should also include the procedures on how to deal with that particular problem. In fact a Partnership Agreements should become a necessity; this is because it is better to anticipate a situation and the problems that may arise from that.

Who is eligible to register for the partnership?

Only Malaysian citizens and permanents residents can only register a business as a partnership.

What are the advantages of a partnership business?

Partnerships are easy to set up; this is because when you go into a partnership you will have a wider capital base compared to that of a sole proprietorship as the partners will pool their capitals and work together in the business that they have set up. A partnership would be an excellent arrangement especially if you are operating a business that requires different sets of skills to run the business. This is where each of the partners can contribute to the business whether it is their knowledge, skills or the contacts that they have. With such help you may be able to overcome some of the obstacles much easier as compared to facing it alone as a sole proprietor.

What are the disadvantages of a partnership?

If you entered a business as a partnership then there will be some risks, for example you will be liable for the debts of the partnership even if it was caused by the actions of the other partner. With unlimited liability each of the partners will then be liable to use their own private resources to meet the partnership’s debt. At a more personal level, you may face the risk of not being able to work together and no one will be able to guarantee that disagreements will not occur in the course of the partnership. The partnership will end if any one of the partners resigns or dies.

What names can I include for the business?

For your business you can either use your name as stated in your National Registration Identification Certificate, for example Chee See Lim and so on or you can even use trade names such as 123 Enterprise or 123 Import-Export Agencyfor the business. If you are in West Malaysia and you register your business using your name then you do not need to apply for a business name approval. However if you still want to have a business name then you must apply for approval using the “Application of Business Name Form” before you begin the process of registering your business.

If you are in Sabah, you will not need to apply for the business name approval whether it is your name or the business name, the only thing that you will need to apply for during the registration. You should also take note that certain names cannot be registered as business names, for example you cannot register the names of any person that is not the owner of the business and the names of those that have been registered by others are also not allowed.

Names that have connections with the government agencies or departments, country and state are also not allowed to be registered. So the business names should not contain the words such as “Diraja”, “Nasional”, “Koperasi”, “Royal”, “National”, and “Chartered”. Names that use words that have been interpreted as being registered under any other law such as Companies Act, Societies or body corporate by the “Royal Charter” or that of any local authority should not be registered.

The Registrar of Business, Municipal Council and Dewan Bandaraya has the right to reject the application of the names which in their opinions are misleading by nature, scope or importance of the business that has been carried on under such a name.

How do I start a partnership?

The application procedure to apply for the sole proprietorship is a simple one; as soon as the business commences business you must then register the business. It is an offence if you do not register your business so you must register as soon as possible.

However the application procedure in West Malaysia is slightly different as compared to that from the state of Sabah, East Malaysia. As with all formal applications you must use ball point pens when you are filling in the forms.

If you are registering your business on West Malaysia then you will need “Form A” from the Registrar of Business or ROB. Once you have obtained it then you will need to fill up the form accordingly. After that “Form A” must then be verified by the associates of the business and the signature must then be attested by either a member of the parliament, a judge, advocates or solicitors, Justice of the Peace (J.P), a member of the Dewan Undaganan Negeri, village headman or a Commissioner for Oaths. Then you must attach a copy of the NRIC on the “Form A”.

The registration fee for the partnership business is RM50. There will be an additional fee of RM1 for each of the branch that has been registered and RM5 for a copy of the registered business information. Once you have settled that, a “Certificate of Registration” will then be issued to the successful application. The “Certificate of Registration” must then be displayed at the business premise.

If you are setting up a business in Sabah, East Malaysia, you will then need to obtain a copy of the “Application for a Trading License Form (Section 5)” from the Municipal Council, the Dewan Bandaraya or the Majlis Perbandaran. The copy of the form will cost RM1, you will then need to fill in the form and enclose a copy of your NRIC, the tenancy agreement and the receipt of the property assessment paid up to the date. The signature on the form does not need to be attested, however the attached documents except for the receipt of the property assessment must be a certified true copy by a judge, magistrate, advocates or solicitors, Justice of the Peace (J.P) or the Commissioner for Oaths. The registration fee for the sole proprietorship is RM25 per annum and the RM5 is the processing fee for both the name as well as the business name. Upon successful application you will then be issued a “Trading License” or “Form B” and this license must be displayed at the business premise.

How long can I use a certificate of registration or trading license?

In West Malaysia the “Certificate of Registration” is valid for one year from the date that was registered and it can be renewed on an annual basis. The renewal fee is RM25 and there will be an additional fee of RM1 for each of the branch. In Sabah the “Trading License” is valid until the 31st of December of each year from the date that you have registered your business. This means that new applicants will normally be charged a pro rata registration fee that is based on the date of the application and the renewal will cost RM25.

Where can I renew my license or the certificate?

The “Certificate of Registration” can be renewed at any of the Registrar of Business, the post office, any of the branches or either by mail by presenting the Business Registration Number upon the renewal payment. While in the state of Sabah the “Trading License” can be renewed at the Majlis Perbandaran, the Municipal Council, or the Dewan Bandaraya by submitting the “Form P.L.B(1)” together with the renewal payment as well as the “Trading License”. You will also be able to renew your license or the certificate at the earliest of three (3) months before the expiration date. However you should also take note that the renewal of business registration is an offence and you can be compounded for it.

What should I do if there are any changes to the business ownership or the particulars of the business?

Business owners should take note that it is an offence if they fail to change any of the business particulars and can be compounded for it. For businesses in West Malaysia, you should obtain the “Form B” for the Changes of Business Particular Form. There are four (4) types of the “Form B” – “B1” is the form that is sued for the changes in the principal address of the business, “B2” is used for the changes in the particular types of the business, “B3” is the form for the changes in the particulars of the branches and finally there is “B4” that is used for the changes in the particulars of the partner. The registration fee for the “Form B” is RM5 for each of the submission and there will also be an extra charge of RM1 for each of the branch. Another RM5 will be charge if you request for a copy of the information regarding the registered business. This of course if different from the procedure in Sabah, here you will need to proceed to the Municipal Council or the Dewan Bandaraya. There you will need to obtain the “Notice of Change in Particulars” of the “Form C”. This will cost you RM2 for the processing fee.

What should I do if I decide to close my business?

If you have already decided that you want to close down your business then you should notify the Dewan Bandaraya or the Municipal Council in writing. For the businesses that have been registered with the Registrar of Business or ROB, you will need to fill in the Notification of Disclosure of Business “Form C” with 14 days from the date of the termination. The registration for “Form C” is free. You should take note that failure to inform the Registrar of Business or Municipal Council or the Dewan Bandaraya that your business has ceased operation is an offence.

What is the procedure is one of the partners passed away?

If you are faced with this unfortunate situation then you would need to immediately inform the Registrar of Business or ROB. You will face being compounded if you are late in reporting the matter to the organization. You should also need to remember to bring along the Death Certificate of the deceased. You will not need to cease the operations of your business and the Registrar of Business or the ROB will make the necessary adjustments in updating the records. If you are in Sabah, you will need to submit “Form C” and attach a copy of the Death Certificate of the deceased to the Municipal Council or the Dewan Badaraya. You will then be requested to sign the Statutory of Declaration where a new “Trading License” will be issues and the particulars will also be updated.

I am currently operating a business in Penang, is it still possible for me to register my business in Selangor?

Unfortunately you will not be able to do so and that is the disadvantage of the partnership. If you still want to register your business than you must apply for a new registration at the nearest office of the Registrar of Business or the Municipal Council or the Dewan Bandaraya.

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